SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): October 22, 2003
FTI CONSULTING, INC.
(Exact Name of Registrant as Specified in Charter)
Maryland 001-14875 52-1261113
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
900 Bestgate Road, Suite 1000, Annapolis, Maryland 21401
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (410) 224-8770
ITEM 5. OTHER EVENTS AND REQUIRED FD DISCLOSURE.
Agreement to Acquire KPMG LLP's Dispute Advisory Services Business
FTI Consulting, Inc. ("FTI") has entered into a definitive asset purchase
agreement dated October 22, 2003 with KPMG LLP to acquire, through FTI's newly
formed acquisition subsidiary, DAS Business LLC, substantially all of KPMG LLP's
domestic Dispute Advisory Services business (the "DAS Business") for
approximately $89.1 million in cash. The DAS Business is presently operated (and
historically has been operated) by KPMG LLP as a component of its forensic
accounting and investigatory practice group -- KPMG Forensic.
The acquisition is subject to customary closing conditions, including the
expiration or early termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and is
expected to be consummated during the fourth quarter of 2003.
Share Repurchase Program
Separately, FTI approved the establishment of a share repurchase program
under which FTI may purchase, from time to time, up to $50 million in value of
its common shares over the next 12 months. Such shares are intended to be
purchased in open market or privately negotiated transactions, and be funded
with a combination of cash on hand, existing credit lines and/or new credit
facilities.
A copy of the asset purchase agreement is attached hereto as Exhibit 2.1
and the full text of FTI's press release issued on October 22, 2003 relating the
acquisition and the establishment of the share repurchase program is attached
hereto as Exhibit 99.1 to this Current Report on Form 8-K and incorporated
herein by reference in its entirety.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
Exhibit Number Description
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2.1 Asset Purchase Agreement dated October 22,
2003, by and among KPMG LLP, DAS Business
LLC and FTI Consulting, Inc.
99.1 Press Release of FTI Consulting, Inc. dated
October 22, 2003.
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On October 22, 2003, FTI issued a press release that announces financial
information for the third quarter ended September 30, 2003. A copy of the press
release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is
incorporated herein by reference in its entirety.
The press release filed herewith as Exhibit 99.1 presents earnings before
interest, taxes, depreciation and amortization -- EBITDA -- a non-GAAP financial
measure. A non-GAAP financial measure is a numerical measure of a registrant's
historical or future financial performance, financial position or cash flows
that excludes amounts (or is subject to adjustments that have the effect of
excluding amounts) that are included in the most directly comparable GAAP line
items presented in the issuer's financial statements. In this regard, GAAP
refers to U.S. generally accepted accounting principles. Pursuant to the
requirements of SEC Regulation G, FTI has included a reconciliation in the
earnings release portion of the press release filed herewith as Exhibit 99.1 of
the non-GAAP financial measure to what, in the view of management, is the most
directly comparable U.S. GAAP financial measure.
The aforementioned presentation of EBITDA should be considered in addition
to, but not as a substitute for, the GAAP measures contained in the Condensed
Consolidated Statement of Income of FTI included in the press release.
Management of FTI believes that these measures and the information they provide
are useful to investors because they permit investors to view FTI's performance
on the same basis used by management and are often used by research analysts in
the comparison of peer entities within the consulting industry.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, FTI has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FTI CONSULTING, INC.
Dated: October 22, 2003 By: /s/ Theordore I. Pincus
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Theodore I. Pincus
Executive Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit Number Description
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2.1 Asset Purchase Agreement dated October 22,
2003, by and among KPMG LLP, DAS Business
LLC and FTI Consulting, Inc. FTI Consulting,
Inc.agrees to furnish supplementally any
omitted schedule to the Commission upon
request.
99.1 Press Release of FTI Consulting, Inc. dated
October 22, 2003.
EXHIBIT 2.1
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ASSET PURCHASE AGREEMENT
by and among
KPMG LLP
as Seller,
DAS BUSINESS, LLC
as Buyer
and
FTI CONSULTING, INC.
as Parent of Buyer
dated as of October 22, 2003
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TABLE OF CONTENTS
Page
1. Definitions...............................................................2
1.1 Defined Terms....................................................2
1.2 Other Definitional and Interpretive Matters......................8
2. Purchase and Sale of the Assets...........................................9
2.1 Purchase and Sale of Assets......................................9
2.2 Assets Not Purchased.............................................9
2.3 Purchase Price..................................................10
2.4 Assumed Liabilities.............................................10
2.5 No Offset.......................................................12
2.6 Further Assurances; Further Conveyances and Assumptions;
Third Party Consents............................................13
3. Representations and Warranties of Seller.................................14
3.1 Organization and Qualification..................................14
3.2 Authorization; Binding Effect...................................15
3.3 Non-Contravention; Consents.....................................15
3.4 Title to Purchased Assets; Sufficiency of Assets................16
3.5 Permits.........................................................16
3.6 Compliance With Laws; Litigation................................16
3.7 Business Employees; Employee Benefits...........................16
3.8 Contracts.......................................................17
3.9 Financial Statements; Absence of Changes........................18
3.10 Data Integrity..................................................19
3.11 Taxes...........................................................19
3.12 Clients.........................................................19
3.13 Insurance.......................................................19
3.14 Government Contracts............................................19
3.15 Business Activity Restriction...................................20
3.16 Brokers.........................................................20
3.17 No Other Representations........................................20
4. Representations and Warranties of Buyer and Parent.......................20
4.1 Organization and Qualification..................................20
4.2 Authorization; Binding Effect...................................21
4.3 Non-Contravention; Consents.....................................21
4.4 Status of Buyer.................................................22
4.6 Sufficiency of Funds............................................22
5. Certain Covenants........................................................23
5.1 Access to Information...........................................23
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5.2 Conduct of Business.............................................24
5.3 Taxes...........................................................24
5.4 Business Employees..............................................26
5.5 Regulatory Compliance...........................................27
5.6 Permit Transfer.................................................27
5.7 Advice of Changes...............................................28
5.8 Non-Competition and Non-Solicitation by Seller..................29
5.9 Non-Solicitation by Buyer and Parent............................30
5.10 Confidentiality.................................................30
5.11 No Additional Representation....................................31
5.12 Limited Use of KPMG Name........................................32
5.13 Transfer of Payments; Delivery of Mail..........................32
5.14 Litigation Support..............................................32
5.15 Enforcement of Non-Competition Agreements.......................33
5.16 Collection Efforts..............................................33
5.17 Financing.......................................................33
6. Closing ................................................................34
6.1 Closing.........................................................34
6.2 Deliveries by Seller............................................34
6.3 Deliveries by Buyer.............................................34
6.4 Contemporaneous Effectiveness...................................35
7. Conditions Precedent to Closing..........................................35
7.1 General Conditions..............................................35
7.2 Conditions Precedent to Buyer's and Parent's Obligations........36
7.3 Conditions Precedent to Seller's Obligations....................37
8. Survival and Indemnity...................................................37
8.1 Survival of Representations and Warranties......................38
8.2 General Agreement to Indemnify..................................38
8.3 General Procedures for Indemnification..........................40
9. Termination..............................................................42
9.1 Termination.....................................................42
9.2 Effect of Termination...........................................42
10. Miscellaneous............................................................43
10.1 Notices.........................................................43
10.2 Expenses........................................................44
10.3 Entire Agreement................................................44
10.4 Jurisdiction, Service of Process................................44
10.5 Governing Law...................................................45
10.6 Waiver..........................................................45
10.7 No Oral Modification............................................45
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10.8 Reasonable Commercial Efforts...................................45
10.9 Assignments, Successors.........................................46
10.10 Severability....................................................46
10.11 Captions........................................................46
10.12 No Third Party Beneficiaries....................................46
10.13 Counterparts....................................................47
10.14 Public Announcement.............................................47
10.15 Waiver of Compliance with Bulk Transfer Laws....................47
Schedules
Schedule 1.1(a) Business Employees
Schedule 1.1(b)(i) DAS Principals
Schedule 1.1(b)(ii) DAS Professionals
Schedule 2.1(b) Personal Property
Schedule 2.1(c) Purchased Contracts
Schedule 3.3(b) Seller Required Consents
Schedule 3.4 Sufficiency of Assets
Schedule 3.5 Permits
Schedule 3.6(a) Seller Compliance with Law
Schedule 3.6(b) Seller Litigation
Schedule 3.7(a) Business Employee Information
Schedule 3.7(b) Benefit Plans
Schedule 3.7(d) Notice of Intent to Withdraw
Schedule 3.8(a) Material Contracts
Schedule 3.8(b) Unapplied Retainers
Schedule 3.9(a) September 30, 2003 Financial Statements
Schedule 3.9(c) Certain Changes Subsequent to September 30, 2003
Schedule 3.9(c)(viii) Transactions with Business Employees
Schedule 3.9(c)(ix) Changes in Employment Terms of Business Employees
Schedule 3.12 Material Clients
Schedule 3.14 Government Contracts
Schedule 3.15 Business Activity Restrictions
Schedule 4.3(b) Buyer Required Consents
Schedule 5.2 Seller's Conduct of Business Until Closing Date
Exhibits
Exhibit A Form of Client Consent
Exhibit B Description of DAS Services
Exhibit C Description of Permitted Services
Exhibit D Form of Bill of Sale
Exhibit E Form of Assumption Agreement
Exhibit F Form of Transition Services Agreement
Exhibit G Form of DAS Principal Certificate
Exhibit H Form of Principal Employment Agreement
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of October 22, 2003, by and among KPMG LLP, a Delaware limited liability
partnership ("Seller"), DAS BUSINESS, LLC, a Maryland limited liability company
("Buyer"), and FTI CONSULTING, INC., a Maryland corporation ("Parent").
RECITALS
A. WHEREAS, Seller, among other things, operates a business unit known as
KPMG Forensic which provides Dispute Advisory Services ("DAS"), as described in
the first paragraph of Exhibit B attached hereto, and Investigative and
Integrity Advisory Services and other services (collectively, "IIAS"), as
described on Exhibit C attached hereto;
B. WHEREAS, Buyer wishes to acquire a material portion of Seller's DAS
business but not Seller's IIAS business;
C. WHEREAS, Seller desires to sell, transfer and assign to Buyer, and Buyer
desires to purchase from Seller, the Purchased Assets and Buyer is willing to
assume the Assumed Liabilities, in each case as more fully described and upon
the terms and subject to the conditions set forth herein;
D. WHEREAS, Buyer is a wholly-owned subsidiary of Parent formed for the
purpose of acquiring, operating and holding the Purchased Assets and assuming
the Assumed Liabilities;
E. WHEREAS, Seller on the one hand, and Buyer on the other hand desire to
execute and deliver the Bill of Sale, the Assumption Agreement, the Transition
Services Agreement and the other certificates, documents and instruments to be
executed and delivered to effectuate the sale, transfer and assignment of the
Purchased Assets and the assumption of the Assumed Liabilities, and the other
transactions contemplated hereby (such agreements and all other agreements,
certificates, documents and instruments entered into at or prior to the Closing
pursuant to the provisions of this Agreement, or subsequent to the Closing,
pursuant to Section 2.6, collectively, the "Collateral Agreements");
F. WHEREAS, as an inducement to Buyer and Parent to enter into and perform
this Agreement and the transactions contemplated hereby, without which
inducement neither Buyer nor Parent would have entered into this Agreement,
Seller has agreed, on the terms and subject to the conditions set forth in
Section 5.8 herein, to refrain from engaging in a Competing Business, and Buyer
and Parent have relied on such agreement; and
G. WHEREAS, the parties have obtained all requisite corporate, limited
liability company and partnership approvals, as the case may be, necessary to
execute and deliver this Agreement.
NOW, THEREFORE, in consideration of and in reliance upon the mutual
premises, agreements, covenants, representations and warranties contained
herein, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and subject to the terms and conditions hereinafter set forth, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
AGREEMENT
1. DEFINITIONS
1.1 DEFINED TERMS
For the purposes of this Agreement, the following words and phrases
have the following meanings whenever used in this Agreement (including the
Schedules and Exhibits hereto):
"Action" means any action, claim, suit, arbitration, inquiry,
investigation or other proceeding of any nature (whether criminal, civil,
legislative, administrative, regulatory, prosecutorial or otherwise) by or
before any arbitrator or Governmental Body or similar Person or body.
"Affiliate" of any Person means any Person that controls, is controlled
by, or is under common control with such Person. As used herein, "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity, whether through
ownership of voting securities or other interests, by contract or otherwise.
"Agreement" has the meaning assigned in the preamble hereof.
"Allocation" has the meaning assigned in Section 5.3(b).
"Assumed Liabilities" has the meaning assigned in Section 2.4(a).
"Assumption Agreement" has the meaning assigned in Section 6.2(c).
"Benefit Plan" means each "employee benefit plan," as defined in
Section 3(3) of ERISA (including any "multiemployer plan" as defined in Section
3(37) of ERISA) and each profit-sharing, bonus, stock option, stock purchase,
stock ownership, pension, retirement, severance, deferred compensation, excess
benefit, defined benefit, supplemental unemployment, post-retirement medical or
life insurance, welfare or incentive plan, or sick leave, long-term disability,
medical, hospitalization, life insurance, other insurance plan, or other
employee benefit plan, program or arrangement, whether written or unwritten,
qualified or non-qualified, funded or unfunded, maintained or contributed to by
Seller in which any Business Employee participates.
"Bill of Sale" has the meaning assigned in Section 6.2(a).
"Business Day" means a day that is not a Saturday, a Sunday or a day on
which money center commercial banks in the City of New York, Borough of
Manhattan, are authorized or required by law, regulation or executive order to
remain closed.
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"Business Employees" means only (i) the employees of Seller set forth
on Schedule 1.1(a) and who continue to be employees of Seller immediately prior
to the Closing, (ii) employees hired by Seller between the date of this
Agreement and the Closing Date who continue to be employees of Seller
immediately prior to the Closing Date and to whom Seller acknowledges that Buyer
intends to make offers of employment and who, therefore, shall be designated by
Buyer as Business Employees, (iii) the DAS Principals and (iv) the DAS
Professionals.
"Business Records" means all books, records, ledgers, files, Business
Employee work product, and other similar information and documents of Seller (in
any electronic, magnetic, paper or other form or medium) and all Tax Returns, in
all cases, solely related to the Engagement Agreements or the other Purchased
Assets or Assumed Liabilities (except litigation files related to Excluded
Assets).
"Buyer" has the meaning assigned in the preamble.
"Buyer Indemnified Party" has the meaning assigned in Section 8.2(a).
"Buyer Required Consents" has the meaning assigned in Section 4.3(b).
"Closing" has the meaning assigned in Section 6.1.
"Closing Date" has the meaning assigned in Section 6.1.
"COBRA Coverage" means health continuation coverage as required by
Section 4980 of the Code of Part 6 of Title I of ERISA.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Agreements" has the meaning assigned in Recital E.
"Competing Business" has the meaning assigned in Section 5.8(b).
"Computer Amount" has the meaning assigned in Section 5.18.
"Confidentiality Agreement" has the meaning assigned in Section
5.10(a).
"Confidential Information" has the meaning assigned in Section 5.10(b).
"Contracts" means all contracts, engagement and retention letters,
commitments, undertakings, arrangements, understandings and agreements of every
nature, including all engagement agreements, court-approved retentions, leases
and subleases, licenses and sublicenses, supply contracts, purchase orders and
sales orders or portions thereof, to which Seller is a party currently in effect
or entered into by Seller between the date hereof and the Closing Date and
outstanding as of such date, other than Employment Agreements and Benefit Plans
(it being understood that "Contracts" does not include any notes, mortgages,
indentures, letters of credit, guarantees and other obligations and agreements
for or relating to any lending or borrowing, any leases of real property, any
insurance policies and any agreements creating any
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guarantees or keep-well agreements or other agreements to be liable for the
obligations of another Person by Seller or any software, application or
technology license agreement).
"DAS" has the meaning assigned in Recital A.
"DAS Principals" means the individuals identified on Schedule
1.1(b)(i).
"DAS Professionals" means the individuals identified on Schedule
1.1(b)(ii).
"DAS Services" has the meaning assigned in Section 5.8(b).
"Employment Agreement" means a contract, offer letter or agreement of
Seller with or addressed to any Business Employee pursuant to which Seller has
any actual or contingent liability or obligation to provide compensation or
benefits in consideration for past, present or future services, or pursuant to
which any Business Employee undertakes confidentiality or non-competition
obligations.
"Encumbrance" means any mortgage, pledge, easement, hypothecation,
adverse claim, assignment, charge, imperfection, encumbrance, lien (statutory or
other), charge or other security interest or matter affecting title.
"Engagement Agreement" means a Contract which remains executory and not
fully performed on the Closing Date to which Seller is a party and which relates
to the engagements of the DAS Principals or DAS Professionals who become
Transferred Employees.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" has the meaning assigned in Section 2.2.
"Excluded Liabilities" has the meaning assigned in Section 2.4(b).
"FMLA" has the meaning assigned in Section 3.7(a).
"GAAP" means generally accepted accounting principles, as currently in
effect in the United States applied on a basis consistent with the application
of such principles in the preparation of the Financial Statements.
"Governmental Body" means any nation or government, any state or other
political subdivision thereof, any legislative, executive or judicial unit or
instrumentality of any governmental entity (foreign, federal, state or local) or
any department, commission, board, agency, bureau, official or other regulatory,
administrative or judicial authority thereof or any entity (including a court or
self-regulatory organization) exercising executive, legislative, judicial, Tax,
regulatory or administrative functions of or pertaining to any public authority
or government.
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"Grant Thornton" means Grant Thornton LLP.
"HCA Engagement Agreements" shall mean the following executory
Engagement Agreements currently in full force and effect: (1) that certain
agreement dated May 22, 2002, between Seller, as Independent Review
Organization, and HCA Inc. ("HCA"), (2) that certain agreement dated May 22,
2002 between Seller and Latham & Watkins regarding HCA litigation support, (3)
that certain agreement dated March 3, 2003 between Seller, Ober, Kaler, Grimes &
Shriver and Cedars Hospital and (4) that certain agreement dated March 15, 2003
between Kennedy, Covington, Lobdell & Hickman, L.L.P., Seller and Brunswick
Community Hospital.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"IIAS" has the meaning assigned in Recital A.
"Income Taxes" has the meaning assigned in Section 5.3(e).
"Indemnified Party" means a Buyer Indemnified Party or a Seller
Indemnified Party.
"Indemnifying Party" has the meaning assigned in Section 8.3(a).
"IRS" means the U.S. Internal Revenue Service.
"Knowledge" means, in connection with any representation and warranty
contained in this Agreement that is expressly qualified by reference to the
Knowledge of Seller or Buyer, with respect to Knowledge of Seller, the actual
knowledge, after reasonable investigation, of any of the DAS Principals (but
only with respect to matters, facts or circumstances related to the Purchased
Assets, Assumed Liabilities or DAS Principals), Jack Taylor, Mark Zuffante,
Charles C. Wyand, Jim Buckley, or (Timothy Flynn, or, with respect to Knowledge
of Buyer, the actual knowledge, after reasonable investigation, of Dominic
DiNapoli, Jack B. Dunn, IV, Stewart J. Kahn, Theodore I. Pincus, Dianne R.
Sagner or Philip R. Jacoby, Jr.
"KPMG Name" has the meaning assigned in Section 2.2(a).
"Law" or "Laws" shall mean any law, statute, ordinance, rule,
regulation, writ, pronouncement, enactment, code, order, judgment, ruling,
decree, determination, Tax ruling, injunction or decree of any Governmental
Body.
"Losses" has the meaning assigned in Section 8.2(a).
"Material Adverse Effect" means a material adverse effect on the
business, operations, assets, condition (financial or other) or results of
operations of the Purchased Assets, the Assumed Liabilities or the Buyer or
Parent as the context requires, taken as a whole; provided, that none of the
following shall be deemed, either alone or in combination, to constitute a
Material Adverse Effect: (i) conditions generally affecting any of the
industries or markets in which the Seller or the Buyer or Parent, as the context
requires, operates, (ii) any disruption arising out of or relating to actions
contemplated by the parties in connection with, or
5
which is attributable to, the transactions contemplated hereby, (iii) subject to
the condition set forth in Section 7.2(f), the failure of which to occur shall
automatically be deemed to constitute a Material Adverse Effect, the failure of
any partner, principal or other employee of Seller to accept Buyer's offer of
employment, (iv) irrespective of any consent or approval required as a condition
to Closing (including any consent or approval required as a condition to Closing
pursuant to Section 7.2(e)(i), the failure to obtain which consent or approval
shall automatically be deemed to constitute a Material Adverse Effect) or of
Seller's obligations pursuant to Section 2.6, the failure to obtain any third
party consent or approval necessary or desirable in connection with the transfer
and assignment to Buyer of any Engagement Agreement or (v) loss or potential
loss of customers of Seller's DAS business, which are not registrants under the
Exchange Act, for which Seller provides audit services.
"Material Contracts" has the meaning assigned in Section 3.8.
"Non-Compete Period" has the meaning assigned in Section 5.8(b).
"Ongoing Engagements" has the meaning assigned in Section 3.12.
"Outside Date" has the meaning assigned in Section 9.1(e).
"Parent" has the meaning assigned in the preamble.
"Permits" means all permits, licenses, certificates, approvals,
qualifications, registrations, and similar authorizations issued to Seller by a
Governmental Body related solely to the Purchased Assets, the Assumed
Liabilities or the Transferred Employees, including any amendment, modification,
limitation, condition or renewal thereof.
"Permitted Encumbrances" means (i) Encumbrances for Taxes not yet due
and payable or that are being contested in good faith by appropriate
proceedings, (ii) any mechanics', carriers', workmen's, repairmen's or other
similar liens arising or incurred in the ordinary course of business, (iii) any
liens arising under original purchase price conditional sales contracts and
equipment leases with third parties entered into in the ordinary course of
business, (iv) mortgages, liens, security interests and Encumbrances which
secure debt that is reflected as a liability on the Financial Statements and the
existence of which is indicated in the notes thereto, and (v) Encumbrances or
other imperfections of title which do not, individually or in the aggregate,
significantly interfere with Buyer's ability to use any Purchased Asset in the
ordinary course of business.
"Person" means any individual, corporation, partnership, limited
liability company, limited liability firm, association, joint venture, joint
stock company, trust, unincorporated organization or other entity, or any
Governmental Body.
"Personal Property" means all machinery, equipment, furniture,
furnishings and other tangible personal property owned or leased by Seller.
"Prepaid Expenses" means all credits, prepaid expenses, deferred
charges, advance payments, security deposits and other prepaid items of Seller.
6
"Principal Employment Agreements" has the meaning assigned in Section
7.2(f).
"Purchase Price" has the meaning assigned in Section 2.3(a).
"Purchased Assets" has the meaning assigned in Section 2.1.
"Purchased Contracts" has the meaning assigned in Section 2.1(c)
"Referenced Litigation" means any Action brought or threatened to be
commenced against or otherwise involving Buyer or its Affiliates with respect
to: (i) the hiring or retention by Seller or its Affiliates of any former
partners (or their estates, representatives' trustees, or assignees) of Andersen
Worldwide, S.C., Arthur Andersen, LLP or their Affiliates and alleging
insufficient, or otherwise challenging the amount, timing or method of, payment
of consideration to Arthur Andersen, LLP or its Affiliates in connection with
the solicitation, hiring or treatment of any partners or employees thereof; or
(ii) travel-related billing practices of Seller or its Affiliates.
"Retainer Amount" has the meaning assigned in Section 5.18.
"SEC" means the Securities and Exchange Commission.
"Securities Act" has the meaning assigned in Section 10.2.
"Seller" has the meaning assigned in the preamble hereof.
"Seller Indemnified Party" has the meaning assigned in Section 8.2(a).
"Seller Required Consents" has the meaning assigned in Section 3.3(b).
"September 30, 2003 Financial Statements" has the meaning assigned in
Section 3.9(a).
"Tax Returns" means all returns and reports (including elections,
declarations, disclosures, schedules, estimates and information returns)
required to be supplied to or filed with a Tax authority of a Governmental Body
relating to Taxes.
"Taxes" mean all taxes of any kind, charges, fees, customs, levies,
duties, imposts, required deposits or other assessments, including all net
income, capital gains, gross income, gross receipt, property, franchise, sales,
use, excise, withholding, payroll, employment,, social security, worker's
compensation, unemployment, occupation, capital stock, ad valorem, value-added,
transfer, gains, profits, license, net worth, asset, transaction, and other
taxes, imposed upon any Person by any Law or Governmental Body, together with
any interest and any penalties, or additions to tax, with respect to such taxes.
"Third Party Claim" has the meaning assigned in Section 8.3(a).
"Transfer Date" has the meaning assigned in Section 5.4(b).
"Transferred Employees" has the meaning assigned in Section 5.4(a).
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"Transition Services Agreement" has the meaning assigned in Section
6.2(d).
"Unapplied Retainers" has the meaning assigned in Section 2.1(a).
"WARN Act" has the meaning assigned in Section 5.4(e).
1.2 OTHER DEFINITIONAL AND INTERPRETIVE MATTERS
Unless otherwise expressly provided, for purposes of this Agreement and
the Collateral Agreements, the following rules of interpretation shall apply:
(a) Calculation of Time Period. When calculating the period of time
before which, within which or following which any act is to be done or step
taken, the date that is the reference date in calculating such period shall be
excluded. If the last day of such period is a non-Business Day, the period in
question shall end on the next succeeding Business Day.
(b) Gender and Number. Any reference to gender shall include all
genders, and words imparting the singular number only shall include the plural
and vice versa.
(c) Headings. The provision of a Table of Contents, the division into
Articles, Sections and other subdivisions and the insertion of headings are for
convenience of reference only and shall not affect or be utilized in construing
or interpreting this Agreement and the Collateral Agreements. All references in
this Agreement to any "Section" are to the corresponding Section of the
agreement in which such reference occurs unless otherwise specified.
(d) Herein. The words such as "herein," "hereinafter," "hereof," and
"hereunder" refer to this Agreement as a whole and not merely to a subdivision
in which such words appear unless the context otherwise requires.
(e) Sale. Except where otherwise expressly stated, the word "sale" or
any variation thereof means, with reference to a thing or item, the sale,
transfer, delivery, assignment and conveyance of all right, title and interest
in, to under and in respect of such thing or item.
(f) Including. The word "including" or any variation thereof means
"including without limitation" and shall not be construed to limit any general
statement or description that it follows to the specific or similar items or
matters immediately following it.
(g) Schedules and Exhibits. The Schedules and Exhibits attached to each
of this Agreement and the Collateral Agreements shall be construed with and as
an integral part of this Agreement and the Collateral Agreements to the same
extent as if the same had been set forth verbatim herein and therein. Disclosure
in any of the schedules provided pursuant to Article 3 or Article 4 shall be
deemed to be disclosure on every other schedule in which it may be relevant;
provided that if the disclosure of any item in a schedule other than in the
relevant schedule includes an express cross-reference to each other such
schedule to which the disclosure is intended to relate.
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2. PURCHASE AND SALE OF THE ASSETS
2.1 PURCHASE AND SALE OF ASSETS
Upon the terms and subject to the conditions of this Agreement and in
reliance on the accuracy and completeness of the representations and warranties
contained herein and in the Collateral Agreements, at the Closing, Seller shall
grant, sell, transfer, assign, convey and deliver to Buyer, and Buyer shall
purchase, acquire and accept from Seller, all of the right, title and interest
of Seller in, to under and in respect of, the following assets, as the same
shall exist on the Closing Date (collectively, the "Purchased Assets"):
(a) The advance billings and the unapplied monetary portion heretofore
paid to Seller in respect of retainers relating to the Engagement Agreements to
be assigned and transferred to Buyer hereunder (the "Unapplied Retainers");
(b) the Personal Property listed on Schedule 2.1(b);
(c) all rights and entitlements of Seller under the Contracts listed on
Schedule 2.l(c), including the Engagement Agreements (the "Purchased Contracts")
(d) all Business Records;
(e) all of Seller's rights, title and interests under or pursuant to
all warranties, refunds, rebates, indemnities, representations and guarantees of
or made by vendors or suppliers in connection with the Purchased Assets or the
Assumed Liabilities;
(f) all Permits;
(g) the going-concern value and other intangible assets of Seller
related to the Purchased Assets, other than trademarks and trade names,
including customer lists and related current and historical information; and
(h) all laptop, personal digital assistant, or PDA, and other portable
computers of Seller used primarily by the Transferred Employees.
2.2 ASSETS NOT PURCHASED
Anything in this Agreement notwithstanding, Seller shall not grant,
bargain, sell, transfer, assign, convey or deliver, and Buyer shall not acquire,
accept assignment or transfer of or receive any interest in, any of the assets
of Seller or its Affiliates other than the Purchased Assets (the "Excluded
Assets"). The Excluded Assets include the following:
(a) (i) the name KPMG, any name used by any firm in the KPMG global
network or its predecessor(s), and any derivative of the foregoing including
"Peat Marwick", (ii) any logo, device, trade mark, trade dress, trade name,
service mark or any other words, symbol or style (whether registered or not)
from time to time used in association with or relating to the name "KPMG" or any
such predecessor name or derivative thereof including "Peat Marwick"
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and (iii) any goodwill symbolized by or associated with any of the foregoing
((i), (ii) and (iii) above, collectively, the "KPMG Name");
(b) any accounts receivable or work-in-process of Seller, including any
intercompany receivables and intercompany work in process;
(c) any Prepaid Expenses;
(d) any real property, or any leases, subleases and licenses in respect
of real property to which Seller or any of its Affiliates is a party;
(e) any Benefit Plans or interests in Benefit Plans;
(f) cash and cash equivalents;
(g) Tax refunds and Tax claims;
(h) any insurance policies and agreements;
(i) all rights accruing to Seller pursuant to this Agreement;
(j) all assets of Seller, the use of which or the access to which may
be provided to Buyer pursuant to the Transition Services Agreement, including
any information technology infrastructure or equipment, facilities, furniture,
fixtures and software licenses for software used on any computers used by the
Business Employees;
(k) all books and records of Seller not constituting Purchased Assets
or Business Records; and
(l) all Personal Property other than as provided in Section 2.1.
2.3 PURCHASE PRICE
(a) Buyer shall pay to Seller, in cash, at the Closing, in
consideration of the sale of the Purchased Assets and in addition to assuming
the Assumed Liabilities, the sum of Eighty Nine Million One Hundred Twenty Five
Thousand Dollars and No Cents ($89,125,000.00) (the "Purchase Price").
(b) All payments pursuant to this Section 2.3 shall be made by wire
transfer in immediately available funds to an account designated by Seller in
written instructions to be delivered to Buyer at least two (2) Business Days
prior to the payment date.
2.4 ASSUMED LIABILITIES
(a) In connection with the purchase and sale of the Purchased Assets
pursuant to this Agreement, at the Closing, Buyer shall assume and agree to
honor, pay and discharge when due the following liabilities and obligations of
Seller (the "Assumed Liabilities"):
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(i) the liabilities and obligations of Seller under the
Engagement Agreements or other Purchased Contracts assigned and transferred to
Buyer hereunder, to the extent the performance thereof by Buyer is due from and
after the Closing Date, including the obligation to perform services with
respect to the unapplied monetary portion heretofore paid to Seller of all
retainers in respect of such Engagement Agreements;
(ii) the liabilities and obligations of Seller under the Permits
included in the Purchased Assets to be performed on or after, and in respect of
periods following, the Closing Date; and
(iii) all other liabilities and obligations in respect of the
Purchased Assets to the extent arising out of or related to facts or
circumstances occurring after the Closing.
(b) Notwithstanding anything to the contrary in this Agreement, the
Assumed Liabilities shall not include any liabilities (collectively, the
"Excluded Liabilities") not expressly assumed pursuant to Section 2.4(a),
including:
(i) with respect to accounts payable, trade payables, notes
payable or any other payables or similar obligations of Seller existing on or
for periods prior to the Closing Date;
(ii) with respect to any indebtedness for borrowed money or
otherwise of Seller;
(iii) with respect to any liability of Seller for the payment of
Taxes with respect to periods ending on or prior to the Closing Date;
(iv) arising out of any Employment Agreement, or any contract,
plan commitment, arrangement, understanding or agreement, other than obligations
arising under the Purchased Contracts;
(v) arising from the breach or violation of any Contract or
Permit or other obligation or legal duty (including any tort committed or
alleged to have been committed by Seller) or any violation of any Law occurring
or in existence on or prior to the Closing Date, or arising from any breach or
violation of any Contract which results from the transactions contemplated by
this Agreement;
(vi) any statutory obligations with respect to the continuation
of benefits for Persons who cease to be Business Employees (other than
Transferred Employees who subsequently cease to be employees of Buyer) and any
obligations or liabilities of any kind under or in respect of the Benefit Plans;
(vii) any liabilities under the Employment Agreements, arising
out of Seller's employee manuals or policies, or any severance or termination
costs incurred by Seller in connection with any of its partners or employees
under Benefit Plans, contracts, policies, unemployment or other applicable laws
or otherwise;
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(viii) arising from any environmental risk, contamination,
condition, discharge or disposal occurring or in existence on or prior to the
Closing Date, whenever and by whomever generated, whether or not in compliance
with applicable laws;
(ix) any liability of Seller which any Person seeks to impose
upon Buyer by virtue of any theory of successor liability (including liabilities
relating to the Referenced Litigation), environmental matters, employee benefit
plans, Taxes and labor and employment matters, or any indemnification
obligations either arising prior to the Closing Date or relating to periods
ending on or prior to the Closing Date;
(x) pertaining to the products and/or services of Seller sold or
performed in full on or prior to the Closing Date in the nature of express or
implied warranty, negligence, product liability, strict liability, personal
injury, property damage, economic loss or replacement cost or third party
liability, whether such obligations, liabilities or claims are in existence now
or on the Closing Date or arise hereafter or thereafter, and whether or not any
such obligations, liabilities or claims are presently known, foreseeable or
discoverable by Seller or Buyer;
(xi) with respect to any legal, accounting, professional,
advisory, broker's, finders', referral, appraisal or other fees, costs or
expenses of Seller in connection with the transactions contemplated by this
Agreement, or any other Taxes, expenses or liabilities which under the express
terms of this Agreement are not to be borne by Buyer;
(xii) with respect to any Actions or other contingent liabilities
of Seller, whether or not disclosed to Buyer, relating exclusively to periods
and occurrences ended on or before the Closing Date;
(xiii) relating in any way to Seller's ownership, use, control or
possession of any real property or personal property (except as expressly
provided in the Transition Services Agreement);
(xiv) with respect to hazards to health or safety arising
exclusively from the operation of the Purchased Assets on or prior to the
Closing Date, including hazards of occupational injury or disease;
(xv) for the payment for any outstanding drafts or checks issued
by Seller which are outstanding as of the Closing Date; or
(xvi) relating in any way to Seller's characterization for Tax
purposes of its use of the Purchase Price for the return of capital
contributions of any withdrawing DAS Principals or DAS Professionals.
2.5 NO OFFSET
Buyer's obligations under Section 2.4 shall not be subject to offset or
reduction for any reason, including by reason of any actual or alleged breach of
any representation, warranty or covenant contained in this Agreement or any of
the Collateral Agreements or any right or alleged right to indemnification
hereunder.
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2.6 FURTHER ASSURANCES; FURTHER CONVEYANCES AND ASSUMPTIONS; THIRD
PARTY CONSENTS
(a) Subject to the specific terms and conditions hereof, Seller and
Buyer each agrees to use its reasonable commercial efforts to take all actions
and to do all things necessary, proper or advisable to consummate, as promptly
as practicable, the transactions contemplated by this Agreement and the
Collateral Agreements and to satisfy all conditions precedent to Closing set
forth in Article 7. Seller will, from time to time, subsequent to the Closing
Date, at Buyer's request and assistance as necessary, execute and deliver such
other instruments of conveyance, assignment and transfer, execute and deliver
all such other documents and take all such other actions as Buyer may reasonably
request to more effectively convey, assign, transfer to and vest in Buyer all
right, title and interest in, to and under the Purchased Assets, including
taking actions, filing motions and notices with a Governmental Body to
effectuate the transfer or assignment of a Purchased Contract or the termination
of a Purchased Contract for the purpose of enabling the hiring and retention of
Buyer to perform the obligations and enjoy the benefits of the Purchased
Contracts. Buyer and Seller will work together in good faith from the date of
this Agreement to and following the Closing Date to (i) transfer to Buyer all
electronic data and records and accounting and personnel information related to
the Engagement Agreements and the Transferred Employees and similar information
that is included within the Purchased Assets and (ii) migrate all electronic
Business Records into a format compatible with software or technology owned or
licensed by Buyer. Buyer will, from time to time, subsequent to the Closing
Date, at Seller's request, execute and deliver such other instruments of
conveyance, assignment and transfer and take such other actions as Seller may
reasonably request in order to more effectively accomplish the assumption of,
and discharge Seller from responsibility for, the Assumed Liabilities.
(b) Nothing in this Agreement or the Collateral Agreements shall be
construed as an attempt or agreement to assign any Purchased Asset, including
any Purchased Contract, license, Permit, certificate, approval, authorization or
other right, which by its terms or by Law is not capable of being sold,
assigned, transferred, delivered, subleased or sublicensed without the consent,
action, approval or waiver of a third party or a Governmental Body or which is
cancelable by such Person in the event of any such sale, assignment, transfer,
delivery, sublease or sublicense or the sale, assignment, transfer, delivery,
sublease or sublicense of which would affect adversely the rights of any party
hereto, unless and until such consent or waiver shall be given. Seller shall use
its reasonable commercial efforts (including obtaining written consents in the
form of Exhibit A), and Buyer shall reasonably cooperate with Seller, to obtain
such consents, actions, approvals, authorizations, orders or waivers and to
resolve the impediments to the sale, assignment, transfer, delivery, sublease or
sublicense required by this Agreement or the Collateral Agreements; provided
that Seller shall not be required to pay any consent fees or make any other
monetary or materially burdensome concessions to any Person in order to obtain
any consents, actions, approvals, authorizations, orders or waivers.
In the event any such consents, actions, approvals, authorizations,
orders to or for the assignment or transfer of any Purchased Contract are not
obtained on or prior to the Closing Date (and, if any such consent, approval,
authorization, order or waiver relates to an HCA Engagement Agreement and Buyer
elects to proceed with the Closing irrespective of the provisions of Section
7.2(e)), then, without regard to the provisions of Section 9.1(e), for a
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period of one year after the Closing Date, Seller shall continue to use its
reasonable commercial efforts to obtain all such consents, actions, approvals,
authorizations, orders and waivers and Seller shall use its reasonable
commercial efforts to obtain for Buyer any lawful and economically feasible
arrangement requested by Buyer to provide and vest Buyer with the full right,
title and interest of Seller in the benefits under any such Purchased Contract,
including Buyer's right to perform all services to be performed by Seller
thereunder, as Seller's duly authorized subcontractor or agent, and arranging
for (and securing all necessary consents, actions, approvals, authorizations,
orders or waivers for) the direct billing and collection by Buyer of all
invoices with respect to work performed in connection with such Purchased
Contracts; provided that Buyer shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit to the extent Buyer
would have been responsible therefor hereunder if such consent, action,
approval, authorization, order or waiver had been obtained; and provided,
further that neither Seller nor Buyer shall be required to pay any consent fees
or make any other monetary or materially burdensome concessions to any Person in
order to obtain any such consents, actions, approvals, authorizations, orders or
waivers.
During such time as the parties are using commercially reasonable
efforts to obtain consents, approvals, authorizations or orders to or for the
assignment or transfer of any Purchased Contracts hereunder following the
Closing (including, any Purchased Contract that required approval, authorization
or an order of a Governmental Body for Seller to perform services or receive
compensation under the Purchased Contract), if and to the extent that Buyer is
unable to provide services under any such Purchased Contract (including, by
virtue of the fact that a Governmental Body does not authorize Seller to cease
performing services under the Purchased Contract or otherwise), Seller may,
notwithstanding anything to the contrary herein, continue to perform such
services, if it so elects, and receive its customary fees and expenses
thereunder, or if Seller is unable to perform such services for any reason (and
Buyer is not able for any reason to perform the work being performed by the
Seller), Seller may terminate or withdraw from the Purchased Contract.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents, warrants and covenants to Buyer and Parent as
follows:
3.1 ORGANIZATION AND QUALIFICATION
Seller is a limited liability partnership duly organized, validly
existing and in good standing under the Laws of the State of Delaware, and
Seller has all requisite power and authority to carry on its DAS business in all
material respects as currently conducted and to own, lease or license and
operate the Purchased Assets owned, leased or licensed by it. Seller is duly
qualified to do business and is in good standing as a foreign limited liability
partnership in each jurisdiction where the ownership or operation of the
Purchased Assets or the conduct of its DAS business requires such qualification,
except for failures to be so qualified or in good standing, as the case may be,
that would not individually or in the aggregate have a Material Adverse Effect
with respect to the Purchased Assets.
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3.2 AUTHORIZATION; BINDING EFFECT
(a) Seller has all requisite partnership power and authority to execute
and deliver this Agreement and each Collateral Agreement to which it will be a
party and to consummate the transactions contemplated hereby and thereby, and
has duly authorized the execution, delivery and performance of this Agreement
and each Collateral Agreement to which it will be a party by all requisite
partnership action.
(b) This Agreement and each Collateral Agreement to which it will be a
party has been or, on or prior to the Closing will be duly executed and
delivered by Seller, and, assuming due execution by Buyer, this Agreement is,
and each Collateral Agreement to which Seller will be a party, when duly
executed and delivered by Seller, will be, valid and legally binding obligations
of Seller, enforceable against Seller in accordance with their respective terms,
except as such agreements may be subject to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws and equitable
principles relating to or affecting or qualifying the rights of creditors
generally and general principles of equity.
3.3 NON-CONTRAVENTION; CONSENTS
(a) The execution and delivery of this Agreement and the Collateral
Agreements by Seller and, assuming that all Seller Required Consents listed in
Schedule 3.3(b) have been obtained or made, the consummation of the transactions
contemplated hereby and thereby, do not and will not: (i) conflict with or
result in a breach or violation of any provision of any organizational document
of Seller; (ii) violate or result in a breach of or constitute an occurrence of
a default under any provision of, result in the acceleration or cancellation of
any obligation under, or give rise to a right by any party to terminate or amend
its obligations under, any Material Contract, or result in the creation of any
Encumbrance upon any of the Purchased Assets; or (iii) violate any material Law
of any Governmental Body having jurisdiction over Seller, the Purchased Assets
or the Assumed Liabilities, except, in the case of clauses (ii) and (iii), as
would not individually or in the aggregate have a Material Adverse Effect with
respect to the Purchased Assets or the Assumed Liabilities.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Person (including any Governmental Body) is
required to be obtained by Seller in connection with the execution and delivery
of this Agreement and any Collateral Agreement to which Seller will be a party
or for the sale of the Purchased Assets and the consummation by Seller of the
transactions contemplated hereby or thereby, except for (i) any filings required
to be made under the HSR Act, (ii) consents or approvals of Third Parties
required to transfer or assign to Buyer the Purchased Assets (including in the
case of a Purchased Contract where Seller is retained by order of a court, any
approvals, authorizations or orders of such court necessary to allow the Buyer
to perform the services under and enjoy the benefits of the Purchased Contract),
or assign the benefits of or delegate performance with regard thereto, in each
case as set forth in Schedule 3.3(b) (the "Seller Required Consents"), and (iii)
consents, approvals, orders, authorizations, registrations, declarations or
filings, the failure of which to be obtained or made would not individually or
in the aggregate have a Material Adverse Effect with respect to the Purchased
Assets or result in the failure to be satisfied of the condition set forth in
Section 7.2(e)(i).
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3.4 TITLE TO PURCHASED ASSETS; SUFFICIENCY OF ASSETS
Seller has, and at the Closing will have, good and valid title to, or a
valid and binding leasehold interest or license in, the Purchased Assets, free
and clear of any Encumbrance except for Permitted Encumbrances. Except as
provided in Schedule 3.4, the rights in the Purchased Assets to be conveyed
hereby and by the Collateral Agreements (but excluding any Purchased Assets not
conveyed in accordance with the terms hereof), together with the rights afforded
to Buyer under the Transition Services Agreement are, taken as a whole,
sufficient to operate the Purchased Assets immediately after the Closing in
substantially the same manner as they are presently being operated by Seller.
3.5 PERMITS
Except as set forth on Schedule 3.5, there are no material Permits, and
all Permits identified on Schedule 3.5 have been duly obtained by Seller and are
currently in effect. Seller is in compliance in all material respects with all
such Permits identified on Schedule 3.5 in connection with the operation and
ownership of the Purchased Assets and the management of the Assumed Liabilities,
and no proceeding is pending or, to Seller's Knowledge, threatened to revoke or
limit any such Permit.
3.6 COMPLIANCE WITH LAWS; LITIGATION
(a) Except as set forth on Schedule 3.6(a) and except as would not
individually or in the aggregate have a Material Adverse Effect with respect to
the Purchased Assets and Assumed Liabilities, Seller is in compliance with all
Laws and Permits of or from Governmental Bodies applicable to the Engagement
Agreements, the Purchased Assets and the Assumed Liabilities.
(b) Except as set forth on Schedule 3.6(b), no judgment, order, writ,
injunction, arbitral decision or decree of any Governmental Body that is related
to the Purchased Assets or the Assumed Liabilities is in effect nor is any
Action with respect to any of the Purchased Contracts, Permits, or any other
Purchased Assets, pending or, to Seller's Knowledge, threatened, in each case as
would individually or in the aggregate have a Material Adverse Effect with
respect to the Purchased Assets or the Assumed Liabilities.
3.7 BUSINESS EMPLOYEES; EMPLOYEE BENEFITS
(a) Schedule 3.7(a) contains a complete and accurate list, as of the
date of this Agreement, of the following data with respect to each Business
Employee (i) the position held, description of duties and aggregate annual base
salary and incentive compensation and perquisites for Seller's last fiscal year,
such Business Employee's eligible accrued and unused vacation and sick days as
of September 30, 2003 and date of hire, (ii) whether such Business Employee is
actively at work as of such date, and (iii) if such Business Employee is not
actively at work as of such date, the nature of his or her absence (e.g.,
vacation, illness, short-term disability or leave of absence under the Family
and Medical Leave Act (the "FMLA")) and his or her expected or required date of
return to active service.
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(b) Schedule 3.7(b) contains a complete and accurate list of all
Benefit Plans. With respect to each of the Benefit Plans identified on Schedule
3.7(b), Seller has made available to Buyer true and complete copies of all plan
documents and benefit schedules, or if none exist, a complete and accurate
summary of the material terms thereof.
(c) No Business Employee is a member of any collective bargaining unit,
and there is not presently pending or existing, and to Seller's Knowledge there
is not threatened by any Business Employee, (i) any strike, or material
slowdown, picketing, work stoppage or other material labor dispute, or (ii) any
application for certification of a collective bargaining agent. Seller is in
compliance with all applicable Laws respecting employment and employment
practices, terms and conditions of employment, wages and hours and occupational
safety and health with respect to the Business Employees, except for such
failures as would not individually or in the aggregate have a Material Adverse
Effect with respect to the Purchased Assets or the Assumed Liabilities.
(d) None of the DAS Principals or DAS Professionals (other than as set
forth on Schedule 3.7(d)) has given written notice to Seller of their intention
to resign or withdraw from Seller during the next 12 months.
(e) To Seller's Knowledge, each of the DAS Principals and DAS
Professionals who practice accounting or hold themselves out to be professional
accountants are duly licensed and in good standing as certified public
accountants with relevant Governmental Bodies. To Seller's Knowledge, no
Transferred Employee has been subject to a complaint or found to have violated
any applicable Law concerning workplace behavior.
3.8 CONTRACTS
(a) Schedule 3.8(a) contains a complete and accurate list of certain
enumerated Engagement Agreements, as well as all Purchased Contracts (a) with
accrued revenues for the twelve-month period ended September 30, 2003 of
$250,000 or more, (b) described in subsection (a) that are terminable or
cancelable upon transfer or assignment other than retentions approved by a
Governmental Body, or (c) that would restrict Buyer, following the Closing from
competing with any other Person, to sell to or purchase from any Person or to
hire any Person (the "Material Contracts"). Each Material Contract is valid and
binding on Seller and, to Seller's Knowledge, on the other parties thereto in
accordance with its terms, is in full force and effect and has not been altered,
amended or modified between or among the parties thereto. As of the date hereof,
Seller has not received any written notice and has no Knowledge that it is in
default or breach of and is otherwise delinquent in performance in any material
respects under any Material Contract, and, to Seller's Knowledge, each of the
other parties thereto has performed in all material respects all obligations
required to be performed by it and is not in default in any material respect
thereunder. True and correct copies of all Material Contracts and any amendments
thereto have been delivered or made available to Buyer.
(b) Except as listed on Schedule 3.8(b), as of September 30, 2003,
Seller has no obligation to perform services with respect to Engagement
Agreements to be assigned or transferred to Buyer hereunder in respect of which
there remains an unapplied retainer amount.
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3.9 FINANCIAL STATEMENTS; ABSENCE OF CHANGES
(a) Schedule 3.9(a) contains a true and correct schedule of revenue and
direct costs related to the engagements of the DAS Principals and the DAS
Professionals, taken as a whole, for the 12 month period ended September 30,
2003 (the "September 30, 2003 Financial Statements"). The Business Records are
complete and accurate in all material respects.
(b) Except as set forth on Schedule 3.9(a) or such other exceptions as
would not individually or in the aggregate have a Material Adverse Effect with
respect to the Purchased Assets or the Assumed Liabilities, the September 30,
2003 Financial Statements present fairly the line items set forth on such
schedule for the 12-month period then ended.
(c) Since September 30, 2003, Seller has operated the Purchased Assets
and managed the Assumed Liabilities in the ordinary course consistent with past
practice, and except as set forth in Schedule 3.9(c) or as would not
individually or in the aggregate have a Material Adverse Effect with respect to
the Purchased Assets or the Assumed Liabilities:
(i) there has been no material destruction, damage or other loss
to any material Purchased Assets;
(ii) there has been no sale, lease, or other disposition of any
material Purchased Assets;
(iii) there has been no purchase, lease or other acquisition of
any material properties or assets related to Seller's DAS business or other
capital expenditures related to Seller's DAS business or with respect to the
Purchased Assets or the Assumed Liabilities other than in the ordinary course of
business;
(iv) Seller has not entered into any Material Contract other than
in the ordinary course of business;
(v) no party (including Seller) has accelerated, terminated, made
material modifications to, or cancelled any Material Contract;
(vi) Seller has not imposed any Encumbrance (other than Permitted
Encumbrances) upon any Purchased Asset;
(vii) Seller has not made any loan, to, or entered into any other
transaction with, any of the Business Employees other than in the ordinary
course of business;
(viii) Except as set forth on Schedule 3.9(c)(viii), Seller has
not granted any increase in the base compensation of any of the Business
Employees other than in the ordinary course of business;
(ix) Except as set forth on Schedule 3.9(c)(ix), Seller has not
made any other material change to the employment terms for any of the Business
Employees; and
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(x) Seller has not legally committed to any of the foregoing in
the future.
3.10 DATA INTEGRITY
Seller has not knowingly altered the data included within the Purchased
Assets in any way which would reasonably be expected to damage the integrity of
any other data stored in electronic, optical or magnetic or other form and, to
the Knowledge of Seller, there are no "worms," "viruses," malicious code or
other disabling devices or mechanisms embedded, contained in, or otherwise
affecting such data. The parties acknowledge that the actions of any party
pursuant to Section 2.6(a) shall not constitute a breach of the representations
and warranties set forth in this Section 3.10.
3.11 TAXES
No liens for material Taxes have been filed and no material claims for
Taxes have been asserted in writing, with respect to the Purchased Assets or the
Assumed Liabilities. Seller has paid all material Taxes required to be paid by
it with respect to the Purchased Assets and the Assumed Liabilities that could
give rise to liens against the Purchased Assets.
3.12 CLIENTS
Schedule 3.12 sets forth the names and addresses (subject to applicable
confidentiality restrictions) of the 15 largest clients of the DAS Principals
and the DAS Professionals, on a combined basis, by accrued revenues for the
twelve-month period ended September 30, 2003 (the "Material Clients") and the
amount of accrued revenues for each such Material Client in such twelve-month
period. Other than as related to independence issues where DAS clients are also
clients of the audit business of Seller, Seller has not received any written
notice that any Material Client (i) has ceased, or will cease, to use Seller's
DAS services or (ii) has substantially reduced or will substantially reduce the
use of Seller's DAS services (in either case, other than as a result of the
lapse of the term of the respective engagement letter in accordance with its
terms). Seller has not received written notice from any client of its intention
to take any action described in the preceding sentence as a result of the
consummation of the transactions contemplated by this Agreement or the
Collateral Agreements.
3.13 INSURANCE
All insurance policies that cover Seller's DAS business are in full
force and effect, all premiums with respect thereto have been paid to the extent
due, no notice of cancellation or termination has been received with respect to
any such policy and no claim or claims related to Seller's DAS business are
currently pending under any such policies involving an aggregate amount in
excess of $250,000.
3.14 GOVERNMENT CONTRACTS
Except as set forth on Schedule 3.14, Seller is not a party as of the
date hereof to any Purchased Contract with a Governmental Body in the United
States under which the Seller is now providing or will provide services to such
Governmental Body. Seller has never been
19
suspended or debarred from bidding on contracts or subcontracts to
provide DAS services to any Governmental Body in the United States, nor, to the
Seller's Knowledge, has any suspension or debarment action been contemplated,
threatened or commenced, in each case relating to Seller's providing DAS
services to any Governmental Body in the United States.
3.15 BUSINESS ACTIVITY RESTRICTION
Except as set forth on Schedule 3.15: (a) there is no non-competition
or other similar agreement or commitment to which Seller is a party or subject
to that would have a Material Adverse Effect with respect to the Purchased
Assets or the Assumed Liabilities; (b) Seller has not entered into any agreement
under which the Seller is restricted from providing DAS Services to clients or
potential clients, in the United States, during any period of time; and (c) no
Affiliate of Seller is a party to any agreement, which, by virtue of such
Person's relationship with Seller, restricts Seller from, directly or
indirectly, providing DAS Services in the United States.
3.16 BROKERS
No broker, investment banker, financial advisor or other Person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Seller or any of its Affiliates.
3.17 NO OTHER REPRESENTATIONS
EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS
AGREEMENT AND THE COLLATERAL AGREEMENTS, THE PURCHASED ASSETS ARE SOLD AND THE
ASSUMED LIABILITIES ARE TRANSFERRED HEREBY ON AN "AS IS, WHERE IS" BASIS, AND
SELLER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WRITTEN OR ORAL,
AND HEREBY TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW DISCLAIMS ANY SUCH
REPRESENTATION OR WARRANTY (INCLUDING WITHOUT LIMITATION ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE), WHETHER BY SELLER, ITS
AFFILIATES OR ANY OF ITS OR THEIR OFFICERS, DIRECTORS, PARTNERS, PRINCIPALS,
EMPLOYEES, AGENTS, MEMBERS OR REPRESENTATIVES OR ANY OTHER PERSON, WITH RESPECT
TO THE PURCHASED ASSETS, AND ASSUMED LIABILITIES OR THE EXECUTION AND DELIVERY
OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
4. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
Buyer and Parent hereby jointly and severally represent, warrant and
covenant to Seller as follows:
4.1 ORGANIZATION AND QUALIFICATION
Buyer is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Maryland, and Buyer has all
requisite power and authority
20
to carry on its business as currently conducted and to own or lease and operate
its properties. Buyer is duly qualified to do business and is in good standing
as a foreign limited liability company in each jurisdiction where the ownership
or operation of its properties or the conduct of its business requires such
qualification, except for failures to be so qualified or in good standing that
would not individually or in the aggregate have a Material Adverse Effect.
Parent is a corporation duly organized, validly existing and in good standing
under the laws of the State of Maryland, and Parent has all requisite power and
authority to carry on its business as currently conducted and to own or lease
and operate its properties. Parent is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where the ownership
or operation of its properties or the conduct of its business requires such
qualification, except for failures to be so qualified or in good standing that
would not individually or in the aggregate have a Material Adverse Effect.
4.2 AUTHORIZATION; BINDING EFFECT
(a) Each of Buyer and Parent has all requisite power and authority to
execute and deliver this Agreement and each Collateral Agreement to which it
will be a party and to consummate the transactions contemplated hereby and
thereby, and has duly authorized the execution, delivery and performance of this
Agreement and each Collateral Agreement to which it will be a party by all
requisite action.
(b) This Agreement and each Collateral Agreement to which it will be a
party has been or, on or prior to the Closing will be, duly executed and
delivered by Buyer and, assuming due execution by Seller, this Agreement is, and
each Collateral Agreement to which Buyer will be a party, when duly executed and
delivered by Buyer, will be, valid and legally binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms, except as
such agreements may be subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws and equitable principles
relating to or affecting or qualifying the rights of creditors generally and
general principles of equity.. This Agreement has been duly executed and
delivered by Parent and, assuming due execution by Seller, this Agreement is a
valid and legally binding obligation of Parent, enforceable against Parent in
accordance with its terms, except as such agreement may be subject to
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws and equitable principles relating to or affecting or
qualifying the rights of creditors generally and general principles of equity.
4.3 NON-CONTRAVENTION; CONSENTS
(a) The execution, delivery and performance of this Agreement by Buyer
and Parent and, assuming that all Buyer Required Consents listed in Schedule
4.3(b) have been obtained or made, the consummation by Buyer of the transactions
contemplated hereby, and the execution, delivery and performance of the
Collateral Agreements by Buyer and the consummation by Buyer of the transactions
contemplated thereby, do not and will not: (i) conflict with or result in a
breach or violation of any provision of the Certificate of Formation or
Operating Agreement of Buyer or the Certificate of Incorporation or By-Laws of
Parent, as applicable; (ii) violate or result in a breach of or constitute an
occurrence of default under any provision of, result in the acceleration or
cancellation of any obligation under, or give rise to a
21
right by any party to terminate or amend its obligations under, any
mortgage, deed of trust, conveyance to secure debt, note, loan, indenture, lien,
lease, contract, agreement, instrument, order, judgment, decree or other
arrangement or commitment to which Buyer or Parent, as applicable, is a party or
by which it or its assets or properties are bound, or result in the creation of
any Encumbrance upon any of its assets or properties, which violation, breach,
default or Encumbrance would individually or in the aggregate be material, or
(iii) violate any material Law of any Governmental Body having jurisdiction over
Buyer or Parent or any of their respective properties, which violation would
individually or in the aggregate be material to Buyer or materially impair,
delay or prevent the consummation of the transactions contemplated hereby.
(b) Except as set forth on Schedule 4.3(b), no consent, approval, order
or authorization of, or registration, declaration or filing with, any Person
(including any Governmental Body) is required to be obtained by Buyer or Parent
in connection with the execution and delivery of this Agreement and the
Collateral Agreements to which Buyer will be a party or the consummation by
Buyer and Parent of the transactions contemplated hereby or thereby that has not
been obtained, other than any filings required to be made under the HSR Act
(such scheduled consents, approvals, orders, authorizations, registrations,
declarations and filings being referred to herein collectively as the "Buyer
Required Consents"), and other than such consents the failure to obtain which
would not materially impair, delay or prevent the consummation of the
transactions contemplated hereby.
4.4 STATUS OF BUYER
Buyer is a wholly-owned subsidiary of Parent formed for the purpose of
acquiring, operating and holding the Purchased Assets and assuming the Assumed
Liabilities. Parent is Buyer's sole member and equity holder. Buyer is not
currently engaged in or operating any material business or business activities
and shall not, prior to the Closing Date, engage in or operate any material
business or business activities. Buyer has and, prior to the Closing Date, shall
have, no material obligations under any contracts, leases or other agreements
and no indebtedness for borrowed money, other than with respect to the
transactions contemplated herein.
4.5 BROKERS
No broker, investment banker, financial advisor or other Person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based on arrangements made by or on behalf of Buyer, Parent or any of their
Affiliates.
4.6 SUFFICIENCY OF FUNDS
The funds available to Buyer, taken together with Buyer's available
borrowing capacity, cash on hand and the proceeds of any theretofore committed
financing will at Closing be sufficient to enable Buyer to pay in full the
Purchase Price and any expenses incurred by Buyer in connection with the
transactions contemplated by this Agreement.
22
5. CERTAIN COVENANTS
5.1 ACCESS TO INFORMATION
(a) Seller will (i) provide Buyer and its officers, employees,
accountants, counsel and other representatives reasonable access, including for
inspection and copying, during normal business hours throughout the period prior
to the Closing, to its properties, personnel, contracts, commitments and reports
of examination reasonably requested by Buyer, (ii) furnish or shall cause to be
furnished any and all financial, technical and operating data and other
information pertaining to it as Buyer may reasonably request, and (iii) provide
or cause to be provided such copies or extracts of documents and records related
to its business as Buyer may reasonably request. Notwithstanding the foregoing,
Seller shall not be required by this Section 5.1(a) to disclose or provide
information that is not related to the Purchased Assets and Assumed Liabilities
and, to the extent any documents or information requested by Buyer pursuant to
this Section 5.1(a) contain any such unrelated information, Seller shall have
the right to redact such unrelated information (but only such unrelated
information) from the documents and other information provided to Buyer pursuant
to this Section 5.1(a).
(b) In order to facilitate the transfer and assignment to Buyer of each
of the Engagement Agreements, Seller will provide Buyer, Parent and their
respective officers and other representatives introductions to and contact
information for all appropriate representatives of Seller's clients under the
Engagement Agreements. Buyer, Parent and their respective officers and other
representatives will be permitted to meet with such client representatives
subsequent to the date hereof, under Seller's reasonable direction and subject
to Seller's reasonable supervision, in order to facilitate such transfer and
assignment to Buyer and to establish a business relationship between Parent,
Buyer and such clients following the Closing.
(c) For a period of five years after the Closing Date, upon reasonable
prior written notice, Buyer and Seller shall furnish or cause to be furnished to
each other and their employees, agents, auditors and representatives access,
during normal business hours, to such information, books and records related to
the Purchased Assets and Assumed Liabilities as is reasonably necessary for
financial reporting and accounting matters, the preparation and filing of Tax
Returns, reports or forms for the defense of any Tax claims, assessments, audits
or disputes, or the prosecution or defense of any Action, provided that with
respect to any Tax Returns or other records relating to Tax matters or any other
Action, either party shall have reasonable access to such information until the
applicable statute of limitations shall have expired. Except as otherwise agreed
in writing, each party shall reimburse the other for reasonable out-of-pocket
costs and expenses incurred in assisting the other pursuant to this Section
5.1(c). Each party shall have the right to copy any of such records at its own
expense. Neither party shall be required by this Section 5.1(b) to (a) take any
action that would unreasonably interfere with the conduct of its business or
unreasonably disrupt its normal operations or (b) disclose or provide
information that is not related to the Purchased Assets and Assumed Liabilities
and, to the extent any documents or information requested by the other party
pursuant to this Section 5.1(c) contain any such unrelated information, it shall
have the right to redact such unrelated information (but only such unrelated
information) from the documents and other information provided to the other
party pursuant to this Section 5.1(c).
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(d) Each of Buyer and Seller agrees to preserve all Business Records in
its possession for at least five (5) years after the Closing Date; provided that
each party will preserve all such records relating to Tax matters until
expiration of the applicable statute of limitations. After such five-year period
or expiration of the applicable statute of limitations and at least thirty (30)
days prior to the planned destruction of any Business Records or Tax-related
records, but in any event no longer than the later of seven (7) years after the
Closing Date or the expiration of the applicable statue of limitations, the
party planning to destroy such Business Records or Tax-related records shall
notify in writing and shall make available to the other, upon its reasonable
request, such Business Records or Tax-related records.
5.2 CONDUCT OF BUSINESS
From and after the date of this Agreement and until the Closing Date,
except as set forth on Schedule 5.2 or as otherwise contemplated by this
Agreement or the Schedules and Exhibits hereto or as Buyer shall otherwise
consent to in writing, in each case to the extent related to the Purchased
Assets and Assumed Liabilities, Seller:
(a) will perform the Engagement Agreements and other Purchased
Contracts and operate the Purchased Assets and manage the Assumed Liabilities in
all material respects in the ordinary course consistent with past practice;
(b) will maintain its books and records and carry out its internal time
entry recordation and data processing, production of pre-bills, invoicing,
billing and collection activities, policies and procedures in the ordinary
course consistent with past practice;
(c) will not, other than in the ordinary course of business consistent
with past practice in arm's-length Third Party transactions or as may be
required by Law or a Governmental Body, permit any material Purchased Assets to
be sold, licensed, leased or subjected to any Encumbrance (other than a
Permitted Encumbrance);
(d) will not materially modify any Material Contract, and will continue
the performance in the ordinary course consistent with past practice of its
material obligations under any Material Contracts and other obligations to be
included as part of the Purchased Assets;
(e) will comply in all material respects with all Laws applicable to
the operation of the Purchased Assets and the management of the Assumed
Liabilities; and
(f) will keep its business and properties substantially intact,
including its present operations, working conditions and relationships with
clients, prospective clients and Business Employees.
5.3 TAXES
(a) Seller and Buyer acknowledge and agree that (i) Seller will be
responsible for and will perform all applicable Tax withholding, payment and
reporting duties with respect to any wages and other compensation and benefits
paid or provided by Seller to any Business Employee for a taxable period or
portion thereof ending on or prior to the Closing Date, and (ii) Buyer will be
responsible for and will perform all Tax withholding, payment and reporting
duties
24
with respect to any wages and other compensation and benefits paid or
provided by Buyer or any of its Affiliates to any Transferred Employee after the
Closing Date.
(b) Buyer and Seller shall use reasonable commercial efforts to agree
upon an allocation of the purchase price (including the amount of Assumed
Liabilities that are liabilities for federal income tax purposes) among the
Purchased Assets (the "Allocation"), consistent with Section 1060 of the Code
and the Treasury Regulations thereunder, within a reasonable amount of time
following the Closing Date. Buyer shall provide a proposed Allocation to Seller
within 120 days following the Closing Date. Seller shall propose any changes to
the Allocation within 30 days thereafter, together with a reasonably detailed
explanation of the reasons therefor. Buyer and Seller will negotiate in good
faith to resolve any disputed items, and if Buyer and Seller are unable to agree
on the Allocation within 30 days following delivery of Seller's proposed
changes, then the dispute will be arbitrated by an independent third party,
whose determination shall be conclusive and binding on the parties for all
purposes. The Allocation shall be adjusted to the extent necessary to reflect
any adjustments to the Purchase Price (including any adjustments pursuant to
Section 8.2 of this Agreement).
(c) Each of Seller and Buyer shall timely file IRS Form 8594 and all
other federal, state, local and foreign Tax Returns in accordance with the
Allocation, as adjusted pursuant to Section 5.3(b). Neither Seller nor Buyer nor
any of their respective Affiliates or representatives shall take any position on
any Tax Return that is inconsistent with the Allocation. Buyer and Seller each
agree to promptly provide the other party with any information necessary to
complete Form 8594.
(d) Buyer and Seller shall cooperate fully with respect to all Tax
matters and shall keep each other promptly apprised of any Tax audit or other
controversy that may affect the other or could reasonably be expected to result
in an indemnification obligation hereunder.
(e) Buyer shall pay all sales, transfer, value added (to the extent not
creditable) or similar Taxes and all recording and filing fees and other similar
costs that may be imposed, assessed or payable by reason of the sales,
transfers, leases, rentals, licenses, assignments and assumption of liabilities,
if any, required for performance under this Agreement and the Collateral
Agreements. Buyer and Seller shall cooperate in timely making and filing all
filings, Tax Returns, reports and forms as may be required with respect to any
Taxes described in the preceding sentence. Buyer and Seller shall use reasonable
commercial efforts to avail themselves of any available exemptions or other
opportunities to reduce or eliminate any such Taxes or fees. Notwithstanding any
other provision hereof, Seller shall be responsible for income and capital gains
Taxes or franchise or other Taxes based on overall gross or net income of Seller
from the sale of the Purchased Assets ("Income Taxes").
(f) Liability of Seller for real, personal and intangible property
Taxes for the taxable period including the Closing Date shall be equal to the
amount of such property Taxes for the entire taxable period multiplied by a
fraction, the numerator of which is the number of days in such taxable period
that precede the Closing Date and the denominator of which is the number of days
in the entire taxable period. Liability for the remainder of such Taxes shall be
borne by Buyer. The party paying such liability to the taxing authority shall
provide proof of such payment and a schedule setting out in reasonable detail
the amount of the other party's
25
liability. Such other party shall promptly pay the other the amount of such
liability following notice and demand therefor.
(g) Seller shall deliver to Buyer at Closing a certification of
non-foreign status as described in Section 1.1445-2(b)(2) of the Treasury
Regulations.
5.4 BUSINESS EMPLOYEES
(a) Seller shall provide Buyer with an update to Schedule 3.7(a) on the
second Business Day next preceding the Closing Date. All offers of employment
made by Buyer to any Business Employee (other than DAS Principals and DAS
Professionals who are Business Employees) shall provide for compensation,
health, welfare and retirement benefits and severance benefits to the Business
Employee, that are, on an aggregate basis, substantially equivalent to those
enjoyed by similarly situated employees of Buyer and its Affiliates as of the
date of this Agreement. The terms of all offers of employment to DAS Principals
and DAS Professionals who are Business Employees shall be reflected in the
Principal Employment Agreements. All Business Employees who accept offers of
employment with Buyer are referred to herein as "Transferred Employees."
(b) Neither Buyer nor any of its Affiliates shall adopt, become a
sponsoring employer of, or have any obligations under or with respect to the
Benefit Plans, and Seller shall be responsible for any and all liabilities which
have arisen or may arise under or in connection with any Benefit Plan. Seller
shall be responsible for any and all liabilities relating to or arising out of
the employment of any Transferred Employee by Seller before the date he or she
actually becomes a Transferred Employee (the "Transfer Date"). (c) Seller agrees
to release all Transferred Employees from any covenants (pursuant to any Benefit
Plan, Employment Agreement, or otherwise) that would reasonably be expected to,
at any time after the Closing Date, limit the ability of such Transferred
Employee to compete with Seller or to solicit clients of Seller, or any other
covenants (pursuant to any Benefit Plan or otherwise) that would in any way
restrict the business activities of a Transferred Employee on behalf of the
Buyer with respect to any business in which Buyer is engaged as of the Closing
Date.
(d) Nothing contained in this Agreement shall restrict the ability of
Buyer and its Affiliates to terminate the employment of any Transferred Employee
for any reason at any time after the effective date of his or her employment
with Buyer and its Affiliates. Moreover, provided Buyer otherwise is in
compliance with the terms hereof, nothing contained in this Agreement shall
require Buyer and its Affiliates to maintain any specific Benefit Plan or other
compensation or employee benefit plan, program, policy or practice following the
Closing Date.
(e) Seller shall be responsible for providing any notices required by
the Worker Adjustment and Retraining Notification Act ("WARN Act") or any
similar state, local or foreign law for any event that occurs before the Closing
Date with respect to a Business Employee (including a Transferred Employee), and
Buyer shall be responsible for providing any such notices for any event that
occurs on or after the Closing Date with respect to Business Employees. Seller
shall indemnify and hold harmless Buyer for any liability arising from
26
Seller's failure to comply with the preceding sentence, and Buyer shall
indemnify and hold harmless Seller for any liability arising from Buyer's
failure to comply with the preceding sentence.
5.5 REGULATORY COMPLIANCE
(a) Prior to the date of this Agreement, Buyer and Seller prepared and
made their initial respective filings with the Federal Trade Commission and the
United States Department of Justice that are required to make the initial filing
under the HSR Act in respect of the transactions contemplated hereby, and with
any other Governmental Body the consent or approval of which is necessary for
the transactions contemplated hereby to be consummated. Seller and Buyer will
cooperate in responding promptly to any request for further information from a
Governmental Body, and will in good faith promptly furnish all materials
reasonably required in connection with such filings and any such requests.
Buyer, with Seller's reasonable cooperation, will in good faith use reasonable
commercial efforts to demonstrate that the transactions contemplated hereby
should not be opposed by the Federal Trade Commission, the United States
Department of Justice or such other Governmental Body, and shall use its
reasonable commercial efforts to eliminate as promptly as practicable any
objection that the Federal Trade Commission, United States Department of Justice
or any such other Governmental Body may have to the transactions contemplated
hereby. Seller and Buyer (a) will jointly approve the content and manner of
presentation of all information to be provided to such Governmental Bodies in
connection with such filings regarding markets and the relevant industry and (b)
will consult with each other from time to time regarding the status of such
filings and all strategies and action taken in connection therewith. Each party
shall bear its own expenses in connection with the filings and other actions
described in this Section 5.5(a).
(b) Seller will provide all reasonable cooperation to Buyer, and will
in good faith promptly furnish all materials reasonably required by Seller, in
connection with any disclosure or filing, and any amendments thereto or
modifications thereof, as Seller is required to make with the SEC pursuant to
the Exchange Act and the rules and regulations thereunder, or with the New York
Stock Exchange, pursuant to the rules and regulations thereof, in connection
with this Agreement and the transactions contemplated thereby. Buyer shall
provide Seller with copies of all such filings and disclosures prior to the
making thereof and, at Seller's request, shall consult with Seller regarding the
content and status of such filings and disclosure and all action taken in
connection therewith.
5.6 PERMIT TRANSFER
(a) Except for those Permits that are not transferable by Law or are
immaterial to the Engagement Agreements, Seller shall use its reasonable efforts
to transfer the Permits of Seller to Buyer upon the Closing Date in form and
substance the same as the Permits which were held by Seller. Seller shall give
and make all required notices and reports to the appropriate Governmental Bodies
in connection therewith.
(b) Seller shall assist and cooperate with Buyer for six months
following the Closing in obtaining the issuance in the name of Buyer of any
Permit that is not transferable, and Seller, at Buyer's expense, shall take all
actions reasonably requested by Buyer to facilitate that
27
issuance, including the preparation of any permit applications or necessary
documents, whether for signature by Seller or by Buyer.
5.7 ADVICE OF CHANGES
(a) Seller will promptly advise Buyer in writing of (i) any event known
to Seller which has rendered or reasonably could be expected to render any
representation or warranty of Seller contained in this Agreement or any
Collateral Agreement, if made on or as of the date of such event or the date of
the Closing, untrue or inaccurate in any material respect, (ii) any change,
condition or event that has or could reasonably be expected to have a Material
Adverse Effect with respect to the Purchased Assets or the Assumed Liabilities
or (iii) any failure of Seller to comply with or satisfy in any material respect
any covenant, condition or agreement to be complied with or satisfied by Seller
hereunder.
(b) Buyer will promptly notify Seller in writing of (i) any event known
to Buyer which has rendered or reasonably could be expected to render any
representation or warranty of Buyer or Parent contained in this Agreement or any
Collateral Agreement, if made on or as of the date of such event or the date of
the Closing, untrue or inaccurate in any material respect, (ii) any change,
condition or event that has or could reasonably be expected to have a Material
Adverse Effect with respect to Buyer or the Parent or (iii) any failure of Buyer
or the Parent to comply with or satisfy in any material respects any covenant,
condition or agreement to be complied with or satisfied by Buyer hereunder.
(c) The parties acknowledge and agree that if the Buyer or the Seller
has received notice in accordance with Section 5.7(a) or (b) above or otherwise
has Knowledge of any of the foregoing or any other breach of any representation,
warranty or covenant contained in this Agreement or the Collateral Agreements,
and irrespective of the provisions of Section 7.2 and 7.3, as applicable, such
party proceeds with the Closing, such party shall be deemed to have waived such
condition, event, breach or failure and such party and its related Indemnified
Parties shall not be entitled to be indemnified pursuant to Section 8.2 hereof,
to sue for damages or to assert any other right or remedy relating to such
condition, event, breach or failure, notwithstanding anything to the contrary
contained herein or in any certificate delivered pursuant hereto.
(d) Seller, on the one hand, and Buyer, on the other hand, will
promptly give notice to the other upon becoming aware that any Action is pending
or threatened by or before any Governmental Authority, in each case with respect
to the transactions contemplated by this Agreement or any Collateral Agreement.
Seller, on the one hand, and Buyer, on the other hand, (i) will cooperate in
connection with the prosecution, investigation or defense of any such Action,
(ii) will supply promptly all information reasonably and legally requested by
the other, by any such Governmental Authority or by any party to any such Action
and (iii) will use reasonable commercial efforts to cause any such Action to be
determined as promptly as practicable and in a manner which does not impact
adversely on, and is consistent with, the transactions contemplated by this
Agreement and the Collateral Agreements.
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5.8 NON-COMPETITION AND NON-SOLICITATION BY SELLER
(a) Seller hereby acknowledge and agree that Seller's covenants and
agreements pursuant to this Section 5.8 are a material inducement to Buyer and
Parent to enter into this Agreement and perform the transactions contemplated
hereby and an essential part of the parties' bargain, in the absence of which
neither Buyer nor Parent would have elected to enter into this Agreement, and
that a breach by Seller of any of its agreements under this Section 5.8 could
adversely affect the value of the transaction. Seller hereby further
acknowledges and agrees that Seller's covenants and agreements pursuant to this
Section 5.8 are reasonable and necessary to ensure that Buyer receives the
expected benefits of the transaction and the Purchased Assets and that violation
of any of this Section 5.8 will cause Buyer irreparable harm for which monetary
damages alone would be an inadequate remedy. Accordingly, in the event of any
violation by the Seller of any provision is Section 5.8, Buyer shall be entitled
to seek an injunction or other equitable relief (in addition to any other
remedies it may have) enjoining Seller and, as applicable, its Affiliates,
officers, directors, partners or employees, from committing or continuing such
violation, and Seller shall not be required to post any bond or other security
in connection with any such Action.
(b) Seller agrees that, for a period of four (4) years following the
Closing Date (the "Non-Compete Period"), it will not, directly or indirectly:
(i) engage in any business that offers or provides services (the
"DAS Services") described in Exhibit B hereto that the Seller has engaged in
during the 12-month period preceding the date hereof in the United States (any
such business, a "Competing Business"); provided, that the term "DAS Services"
does not include any services of the type described in Exhibit C hereto and the
term "Competing Business" does not include any business that offers or provides
the services of the type described in Exhibit C;
(ii) have any ownership interest in any Person that engages in a
Competing Business; provided that Seller may own, directly or indirectly, less
than five percent (5%) of the total equity and voting power of all classes of
equity securities of any Person engaged in a Competing Business that is subject
to the periodic reporting requirements of Section 12 or 15(d) of the Exchange
Act at the time of such acquisition of equity;
(iii) market any consulting services that it may offer using the
terms "DAS" or "DAS Services." For the avoidance of doubt, Buyer shall be
entitled to market any consulting services that it may offer in the United
States using the terms "DAS" or "DAS Services" from and after the Closing Date;
and
(iv) assist any other Person in taking any of the actions
specified in clauses (i), (ii) or (iii).
(c) Seller agrees that for a period of five years from the Closing
Date, it shall not hire as a partner, director, principal or employee or engage
as an agent or independent contractor (i) any DAS Principal or DAS Professional
that becomes a Transferred Employee or
29
(ii) any other officer, director, partner, manager, associate, member or other
employee of Buyer or Parent that is engaged in the performance of dispute
advisory, litigation support, forensic accounting or investigative services on
behalf of Buyer, Parent or their Affiliates; provided that nothing herein shall
prevent Seller from hiring an individual of the type described in clause (ii)
above if at any relevant measurement date during the aforementioned five-year
period, such individual ceased to be and was not an officer, director, partner,
manager, associate, member or employee of Buyer or Parent for the preceding,
consecutive six-month period.
(d) Following the Closing Date, Seller shall not directly or indirectly
use or refer to the credentials of, or citations with respect to, DAS or
Seller's DAS business, in the conduct or operation of its business, except with
the prior written consent of Buyer, which may be withheld in Buyer's sole
discretion.
(e) The parties agree that the covenants of Seller included in this
Section 5.8, taken as a whole, reasonable in their geographic scope and their
duration and no party shall raise any issue of the reasonableness of the scope
or duration of the covenants in any proceeding to enforce any such covenants.
If, in any judicial proceeding, a court shall refuse to enforce any separate
covenant, then the unenforceable covenant shall be modified in order to make it
acceptable to the court and enforced accordingly, or, if necessary, deemed
eliminated to the extent necessary to permit the remaining separate covenants to
be enforced.
5.9 NON-SOLICITATION BY BUYER AND PARENT
Each of Buyer and Parent agrees that, from and after the Closing Date
until the date that is five years after the Closing Date, it shall not solicit
for hire or hire as a partner, director, principal or employee or engage as an
agent or independent contractor any officer, director, partner, manager,
associate, member or other employee employed by Seller in its IIAS business;
provided that nothing herein shall prevent Buyer or Parent from hiring any such
individual if at any relevant measurement date during the aforementioned period,
such individual ceased to be and was not an officer, director, partner, manager,
associate, member or employee of Seller for the preceding, consecutive six-month
period.
5.10 CONFIDENTIALITY
(a) The parties acknowledge the execution by Seller and Parent of the
Agreement Regarding Mutual Disclosure of Information, dated as of July 1, 2003,
as amended, by and between Seller and Parent, with respect to the maintenance of
the confidentiality of certain information described therein (the
"Confidentiality Agreement"). The parties acknowledge and agree that such
Confidentiality Agreement remains in full force and effect; provided that, in
the event of any conflict or inconsistency between the provisions of the
Confidentiality Agreement and the provisions of this Agreement, the applicable
provisions of this Agreement shall govern.
(b) For a period of four years after the Closing Date, Seller will not,
and will use reasonable commercial efforts to cause its Affiliates, officers,
directors, employees (including Persons other than Transferred Employees who
cease to be officers, directors or employees subsequent to the Closing Date) not
to use for its or their own benefit or divulge or
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convey to any other Person, any Confidential Information (as hereinafter
defined) related to the Purchased Assets or the Assumed Liabilities. For
purposes of this Agreement, Seller shall not be deemed to have violated this
Section 5.10 if Seller or any of its Affiliates receives a request to disclose
all or any part of the Confidential Information under the terms of a subpoena,
civil investigative demand or order issued by a Governmental Body, and Seller or
such Affiliate, to the extent not inconsistent with such request and to the
extent time reasonably allows: (a) notifies Buyer of the existence, terms and
circumstances surrounding, such request; (b) consults with Buyer on the
advisability of taking legally available steps to resist or narrow such request;
and (c) if disclosure of any Confidential Information is advisable, to prevent
Seller or such Affiliate or any of its or their partners, principals or
employees from becoming subject to any penalty, to furnish only such portion of
the Confidential Information as it reasonably determines that Seller or such
Affiliate is legally obligated to disclose and to exercise reasonable efforts to
obtain an order or other reliable assurance that confidential treatment will be
accorded to the disclosed Confidential Information. Notwithstanding anything to
the contrary in this Section 5.10 or Section 10.14, Seller and Buyer (and each
employee, representative, other agent of Seller or Buyer) may disclose to any
and all Persons, without limitation of any kind, the Tax treatment and Tax
structure of the transactions contemplated by this Agreement and all materials
of any kind (including opinions or other Tax analyses) that are provided to
Seller or Buyer relating to such Tax treatment and Tax structure (provided,
however, that the names of all other identifying information of all entities and
persons have been properly redacted from such materials prior to the disclosure
thereof). For purposes of this Agreement and subject to the first sentence of
this Section 5.10, "Confidential Information" consists of all information,
knowledge or data related to the Purchased Assets and the Assumed Liabilities
not in the public domain or otherwise publicly available which are or was
treated as confidential by Seller, other than information, knowledge or data
that enters the public domain or is or becomes available from a source that was
not known to the recipient thereof to be prohibited from transmitting such
information, knowledge or data pursuant to a contractual, legal, fiduciary or
other obligation, so long as neither Seller nor any of its Affiliates, directly
or indirectly, improperly causes such information to enter the public domain.
(c) Seller hereby acknowledges and agrees that Seller's covenants and
agreements pursuant to this Section 5.10 are reasonable and necessary to ensure
that Buyer receives the expected benefits of the transactions contemplated
hereby and the Purchased Assets and that violation of any of this Section 5.10
will cause Buyer irreparable harm for which monetary damages alone would be an
inadequate remedy. Accordingly, in the event of any violation by the Seller of
any provision is Section 5.10, Buyer shall be entitled to seek an injunction or
other equitable relief (in addition to any other remedies it may have) enjoining
Seller and, as applicable, its Affiliates, officers, directors, partners or
employees, from committing or continuing such violation, and Seller shall not be
required to post any bond or other security in connection with any such Action.
5.11 NO ADDITIONAL REPRESENTATION
Buyer acknowledges that it and its representatives have been permitted
full and complete access to the properties, personnel, books, contracts,
commitments, reports of examination and records related to the Purchased Assets
and Assumed Liabilities which it has requested or desired to see and review, and
that it and its representatives have had a full
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opportunity to discuss with Seller the Purchased Assets and Assumed Liabilities.
Buyer acknowledges that neither Seller nor any Person has made any
representation or warranty, express or implied, as to the accuracy or
completeness of any information regarding the Purchased Assets and Assumed
Liabilities furnished or made available to Buyer and its representatives, except
as expressly set forth in this Agreement and in the Collateral Agreements, and
neither Seller nor any other Person shall have or be subject to liability to
Buyer or any other Person resulting from the disclosure to Buyer, or Buyer's use
of, any such information, except as expressly provided herein.
5.12 LIMITED USE OF KPMG NAME
For a period of one year after the Closing Date, Seller hereby agrees,
and shall cause its Affiliates, not to assert a claim of infringement, tortious
interference, misappropriation, unfair competition or intellectual property
dilution with respect to the use in the United States (other than general
website advertising use) by Buyer of the phrase "formerly members of KPMG's
dispute advisory services practice," or analogous phrases or expressions, in
connection with any statement or description of FTI's acquisitions, corporate
history or the employment history of the Business Employees or in other ways
that are informational; provided, that such phrase appears in a plain typeface
and without color or style. By way of clarification and not limitation, the
foregoing covenant of forbearance by Seller does not apply to any use as a
trademark of the KPMG Name by Buyer or its Affiliates and nothing herein shall
restrict Buyer from fully complying with its future reporting or disclosure
obligations under the Securities Act or Exchange Act, or, subject to Section
10.14, from making any public announcements (or so-called "tombstone"
statements) factually describing the consummation of the transactions
contemplated by this Agreement.
5.13 TRANSFER OF PAYMENTS; DELIVERY OF MAIL
From and after the Closing Date, (a) Seller shall from time-to-time
promptly after receipt thereof, pay over to Buyer, in the same form of
consideration as received by Seller, all sums received under any of the
Purchased Contracts (including the Engagement Agreements) and (b) Buyer shall
from time-to-time promptly after receipt thereof, pay over to Seller, in the
same form of consideration as received by Seller, all sums received in respect
of the Excluded Assets, including any Contracts not included in the Purchased
Assets. From and after the Closing Date, each party may receive and open all
mail or other communications that it receives and which is addressed to the
other party and its Affiliates and deal with the contents thereof in its
discretion to the extent that such mail conspicuously relates to the Purchased
Assets or the Assumed Liabilities; provided that the receiving party shall
promptly notify the other party as to the receipt thereof and make appropriate
arrangements to deliver such materials promptly to the other party.
5.14 LITIGATION SUPPORT
(a) In the event and for so long as any party is actively contesting or
defending against any Third Party Claim (including with respect to Tax matters
relating to the operation of the Purchased Assets or the management of the
Assumed Liabilities arising out of or related to the operation of the Purchased
Assets or the management of the Assumed Liabilities
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prior to the Closing) the other party shall cooperate with the
contesting or defending party and its counsel in the contest or defense, make
available its personnel, and provide such testimony and access to its books and
records, in each case, as shall be reasonably requested by the contesting or
defending party in connection with the contest or defense, all at the sole cost
and expense of the contesting or defending party (unless and to the extent that
the contesting or defending party is entitled to indemnification therefor under
Article 8).
(b) Certain individuals who are Business Employees provide services to
Seller to assist Seller with its ongoing internal investigations, litigation or
other proceedings. Without limiting the generality of Section 5.14(a), following
the Closing, Buyer agrees to cause such Business Employees (to the extent they
become Transferred Employees) to continue to provide such services to Seller at
80% of Buyer's standard rates or such other rates as may be mutually agreed to
until the conclusion of such ongoing internal investigations, litigation or
other proceedings.
5.15 ENFORCEMENT OF NON-COMPETITION AGREEMENTS
Seller agrees that, for a period of four (4) years following the
Closing Date, it will use its best efforts to enforce, at its own expense, the
terms of all non-competition or non-solicitation agreements or arrangements
binding the DAS Principals and DAS Professionals who do not become Transferred
Employees, but only with respect to activities by such DAS Principals and DAS
Professionals that are prohibited to Seller pursuant to Section 5.8(b).
5.16 COLLECTION EFFORTS
Buyer shall provide Seller with such assistance, at Buyer's internal
cost, as Seller may reasonably request in connection with Seller's efforts to
collect accounts receivable related to work performed on Seller's behalf in
connection with the Engagement Agreements by the Business Employees prior to
Closing, including causing the DAS Principals or DAS Professionals to provide
reasonable assistance to Seller during normal business hours in connection with
such efforts.
5.17 FINANCING
Buyer shall have prior to and at Closing sufficient cash, available
lines of credit or other sources of immediately available funds to enable it to
fulfill its obligations hereunder.
5.18 CERTAIN PAYMENTS
Within fifteen (15) days after the Closing, Seller shall provide Buyer
with a statement which sets forth the amount equal to 50% of Seller's original
cost of the Purchased Assets set forth in Section 2.1(h) (the "Computer Amount")
and the amount of Unapplied Retainers as of the Closing Date (the "Retainer
Amount"), together with reasonable documentation therefor. Within five (5) days
following the delivery of such statement, (a) if the Computer Amount is greater
than the Retainer Amount, Buyer shall pay to Seller an amount equal to the
amount by which the Computer Amount exceeds the Retainer Amount and (b) if the
Retainer Amount is greater than the Computer Amount, Seller shall pay to Buyer
an amount equal to the amount by which the Retainer Amount exceeds the Computer
Amount. All
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payments pursuant to this Section 5.18 shall be made by wire transfer
in immediately available funds to an account designated by the payee in written
instructions to be delivered to the payor at least two (2) Business Days prior
to the payment date.
6. CLOSING
6.1 CLOSING
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Greenberg Traurig, LLP in New York
City, commencing at 10:00 a.m., Eastern time, on the third Business Day
following the date on which the last of the conditions specified in Article 7 to
be satisfied or waived has been satisfied or waived, or at such other place or
time or on such other date as Seller and Buyer may agree upon in writing (such
date and time being referred to herein as the "Closing Date").
6.2 DELIVERIES BY SELLER
At the Closing, Seller shall deliver to Buyer the following:
(a) a bill of sale for the Purchased Assets substantially in the form
of Exhibit D (the "Bill of Sale"), duly executed by Seller;
(b) certified resolutions of the Management Committee and Board of
Directors of Seller authorizing the transactions contemplated by this Agreement;
(c) a counterpart of the Assumption Agreement substantially in `the
form of Exhibit E (the "Assumption Agreement"), duly executed by Seller;
(d) a counterpart of the Transition Services Agreement substantially in
the form of Exhibit F (the "Transition Services Agreement"), duly executed by
Seller;
(e) the consents required pursuant to Section 7.2(e);
(f) a duly executed certificate of the chief executive officer or chief
financial officer of Seller, dated the Closing Date, certifying as to the
fulfillment of the conditions set forth in Sections 7.2(a) and (b);
(g) the duly executed certificate referred to in Section 5.3(g);
(h) all such other bills of sale, assignments and other instruments of
assignment, transfer or conveyance, as Buyer may reasonably request or as may be
otherwise necessary or desirable to evidence and effect the sale, transfer,
assignment, conveyance and delivery of the Purchased Assets to Buyer and to put
Buyer in actual possession or control of the Purchased Assets, duly executed by
Seller.
6.3 DELIVERIES BY BUYER
At the Closing, Buyer shall deliver to Seller the following:
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(a) the Purchase Price to be paid as of the Closing Date as provided in
Section 2.3;
(b) certified resolutions of the Managing Member of Buyer and the Board
of Directors of Parent authorizing the transactions contemplated by this
Agreement;
(c) a counterpart of the Assumption Agreement, duly executed by Buyer;
(d) a counterpart of the Transition Services Agreement, duly executed
by Buyer;
(e) a duly executed certificate of the chief executive officer or chief
financial officer of Buyer, dated the Closing Date, certifying the fulfillment
of the conditions set forth in Section 7.3 (a) and (b), as relates to Buyer;
(f) a duly executed certificate of the chief executive officer or chief
financial officer of Parent, dated the Closing Date, certifying the fulfillment
of the conditions set forth in Section 7.3 (a) and (b), as relates to Parent;
(g) all such other documents and instruments as Seller may reasonably
request or as may be otherwise necessary or desirable to evidence and effect the
assumption by Buyer of the Assumed Liabilities, duly executed by Buyer.
6.4 CONTEMPORANEOUS EFFECTIVENESS
All acts and deliveries prescribed by this Article 6, regardless of
chronological sequence, will be deemed to occur contemporaneously and
simultaneously on the occurrence of the last act or delivery, and none of such
acts or deliveries will be effective until the last of the same has occurred.
7. CONDITIONS PRECEDENT TO CLOSING
7.1 GENERAL CONDITIONS
The respective obligations of Buyer and Parent, on the one hand, and
Seller, on the other hand, to effect the Closing of the transactions
contemplated hereby are subject to the satisfaction in full, prior to or at the
Closing, of each of the following conditions, any of which may (to the extent of
applicable Law) be waived in writing by Buyer and Parent, on the one hand, and
Seller, on the other hand, in its sole discretion:
(a) No Law of any Governmental Body shall have been enacted, entered,
promulgated, deemed applicable, enforced or otherwise be in effect that enjoins,
restrains, conditions, makes illegal or otherwise prohibits or could impose
liabilities on Buyer or Seller with respect to the consummation of this
Agreement or any of the Collateral Agreements, and no Action of a Governmental
Body which, if adversely determined, may result in any such Law being enacted,
entered, promulgated, deemed applicable, enforced or otherwise being in effect,
shall be pending.
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(b) Any applicable waiting period under the HSR Act relating to the
transactions contemplated by this Agreement and the Collateral Agreements shall
have expired or been earlier terminated.
(c) Each DAS Principal shall have executed and delivered to Seller a
Certificate in the form attached hereto as Exhibit G. ---------
7.2 CONDITIONS PRECEDENT TO BUYER'S AND PARENT'S OBLIGATIONS
The obligations of Buyer and Parent to effect the Closing of the
transactions contemplated hereby are subject to the satisfaction in full, prior
to or at the Closing, of each of the following conditions, any of which may (to
the extent of applicable Law) be waived in writing by Buyer in its sole
discretion:
(a) The representations and warranties of Seller contained in this
Agreement or any Collateral Agreement or in any schedule, certificate or
document delivered pursuant to the provisions hereof or thereof or in connection
with the transactions contemplated hereby or thereby shall be true and correct
in all material respects (other than representations and warranties that are
qualified as to materiality or Material Adverse Effect, which representations
shall be true in all respects) both when made and at and as of the Closing Date,
as though such representations and warranties were made at and as of the Closing
Date, and except to the extent that such representations and warranties are made
as of a specified date, in which case such representations and warranties shall
be true and correct (to the extent set forth above) as of such specified date.
(b) Seller shall have in all material respects performed all
obligations and agreements and complied with all covenants and conditions
required by this Agreement or any Collateral Agreement to be performed or
complied with by it prior to or at the Closing.
(c) Seller shall have executed and delivered all agreements, documents
and instruments required to be executed and delivered by it pursuant to Section
6.2.
(d) All requisite Permits necessary for the consummation of the
transactions contemplated hereby shall have been duly issued, obtained and
granted.
(e) Seller shall have obtained written consents to (i) the transfer and
assignment to Buyer of each HCA Engagement Agreement and (ii) the execution and
delivery of, or the performance of Seller's obligations or the exercise of
Buyer's right title and interest in, to and under, the Transition Services
Agreement, in each case with respect to clauses (i) and (ii), where the consent
of any other party is required for such assignment or transfer, or execution,
delivery or performance, and (iii) the transfer or assignment to Buyer of all
material Permits of Seller with respect to the operation of the Purchased Assets
or the management of the Assumed Liabilities, if any, where the consent of any
Governmental Body is required for such assignment or transfer, in each case,
without any material limitations, restrictions or conditions.
(f) Principal Employment Agreements in substantially the form set forth
in Exhibit H (the "Principal Employment Agreements") shall have been duly
entered into, delivered and not rescinded by each of the DAS Principals and not
less than 22 of the DAS Professionals.
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(g) None of the HCA Engagement Agreements shall have been terminated,
and none of the parties thereto shall have threatened or stated an intention to
terminate any HCA Engagement Agreement.
(h) There shall not be or exist any change, effect, event,
circumstance, occurrence or state of facts that has had, has or which reasonably
could be expected to have, a Material Adverse Effect with respect to the
Purchased Assets or the Assumed Liabilities.
7.3 CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
The obligations of Seller to effect the Closing of the transactions
contemplated hereby are subject to the satisfaction in full, prior to or at the
Closing, of each of the following conditions, any of which may (to the extent of
applicable Law) be waived in writing by Seller in its sole discretion:
(a) The representations and warranties of Buyer and Parent contained in
this Agreement or any Collateral Agreement or in any schedule, certificate or
document delivered pursuant to the provisions hereof or thereof or in connection
with the transactions contemplated hereby or thereby shall be true and correct
in all material respects (other than representations and warranties that are
qualified as to materiality or Material Adverse Effect, which representations
shall be true in all respects) both when made and at and as of the Closing Date,
as though such representations and warranties were made at and as of the Closing
Date, and except to the extent that such representations and warranties are made
as of a specified date, in which case such representations and warranties shall
be true and correct (to the extent set forth above) as of such specified date.
(b) Each of Buyer and Parent shall have in all material respects
performed all obligations and agreements and complied with all covenants and
conditions required by this Agreement or any Collateral Agreement to be
performed or complied with by it prior to or at the Closing.
(c) Each of Buyer and Parent shall have executed and delivered all
agreements, documents and instruments required to be executed and delivered by
it pursuant to Section 6.3.
(d) There shall not be or exist any change, effect, event,
circumstance, occurrence or state of facts that has had, has or which reasonably
could be expected to have, a Material Adverse Effect with respect to the Buyer
or the Parent which could reasonably be expected to prevent or materially
interfere with the ability of either of them to consummate the transactions
contemplated by this Agreement.
8. SURVIVAL AND INDEMNITY
The rights and obligations of Buyer, Parent and Seller under this
Agreement shall be subject to the following terms and conditions:
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8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of Buyer and Seller contained in
this Agreement and in any Collateral Agreement shall survive the Closing for 24
months; provided that the representations and warranties of Seller pursuant to
the first sentence of Section 3.4 shall survive the Closing in perpetuity.
Neither Seller nor Buyer shall have any liability whatsoever with respect to any
such representations or warranties unless a claim is made hereunder prior to
expiration of the survival period for such representation or warranty.
8.2 GENERAL AGREEMENT TO INDEMNIFY
(a) Subject to Section 5.7(c), Seller shall indemnify, defend and hold
harmless the Buyer and its Affiliates and any employee, representative, agent,
director, officer, partner or principal, as applicable, or assign of Buyer and
its Affiliates (each, a "Buyer Indemnified Party"), and Buyer shall indemnify,
defend and hold harmless the Seller and its Affiliates and any employee,
representative, agent, director, officer, partner or principal, as applicable,
or assign of Seller and its Affiliates (each a "Seller Indemnified Party"), from
and against any and all claims, liabilities, losses, damages, costs and expenses
(including reasonable attorneys' fees and costs) (collectively, "Losses")
incurred by any Buyer Indemnified Party or Seller Indemnified Party, as
applicable, as a result of, arising out of or relating to (i) the failure of any
representation or warranty of the Indemnifying Party (as defined in Section
8.3(a)) contained in this Agreement or any Collateral Agreement to have been
true and correct when made or as of the Closing Date (or as of such different
date or period specified for such representation or warranty) as though such
representation or warranty were made at the Closing Date (or at such different
date or period specified for such representation or warranty) or (ii) the breach
by the Indemnifying Party of any covenant or agreement of such party contained
in this Agreement or any Collateral Agreement.
(b) Seller further agrees to indemnify and hold harmless Buyer and any
other Buyer Indemnified Party from and against any Losses incurred by such party
arising out of, resulting from, or relating to: (i) the Excluded Liabilities;
(ii) the Referenced Litigation; (iii) Seller's failure to comply with the terms
and conditions of any applicable bulk sales or bulk transfer or similar Laws of
any jurisdiction that may be applicable to the sale or transfer of any or all of
the Purchased Assets or the Assumed Liabilities to Buyer; (iv) all other
liabilities and obligations that are expressly made the obligation or liability
of the Seller under this Agreement or the Collateral Agreements; or (v) the
operation of the Purchased Assets and the management of the Assumed Liabilities
prior to the Closing Date or the acts or omissions of Seller, any Business
Employee or any Affiliate, employee or agent of Seller with respect to the
Purchased Assets and Assumed Liabilities at any time prior to the Closing Date.
(c) Buyer and Parent further agree to jointly and severally indemnify
and hold harmless Seller and any other Seller Indemnified Party from and against
any Losses incurred by such party arising out of, resulting from, or relating
to: (i) any of the Assumed Liabilities; (ii) any claim, demand or liability for
the Taxes for which Buyer is responsible pursuant to Section 5.3; (iii) any
medical, health or disability claims of any Transferred Employee relating to
services rendered or benefits earned after the Closing Date other than pursuant
to any Benefit Plan; and (iv) any Loss arising out of or related to Buyer's
continued use and occupancy of
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Seller's facilities, furniture, equipment, systems and networks under the
Transition Services Agreement.
(d) Amounts payable in respect of the parties' indemnification
obligations shall be treated as an adjustment to the Purchase Price.
(e) Whether or not the Indemnifying Party chooses to defend or
prosecute any Third Party Claim (as defined in Section 8.3(a)) both parties
hereto shall cooperate in the defense or prosecution thereof and shall furnish
such records, information and testimony, and attend such conferences, discovery
proceedings, hearings, trials and appeals, as may be reasonably requested in
connection therewith, except that nothing herein shall permit Seller, or require
Buyer as a condition to obtaining indemnification, to seek to collect back sales
or use Tax from clients or customers who are parties to the Engagement
Agreements. Notwithstanding the foregoing, Buyer shall, at the request of
Seller, make reasonable commercial efforts to reduce any indemnification
obligation of Seller with respect to sales Taxes by making appropriate inquiries
of clients who are parties to the Engagement Agreements to determine whether
they have been previously audited for use Taxes by the same jurisdiction for the
same period or periods.
(f) The indemnification obligations of each party hereto under this
Article 8 shall inure to the benefit of the Affiliates, employees,
representatives, agents, directors, officers, partners and principals, as
applicable, and assigns, of the other party hereto on the same terms as are
applicable to such other party.
(g) The Seller's liability for all claims made under this Section 8.2
shall be subject to the following limitations: (i) the Seller shall have no
liability for any such claim(s) until, individually or in the aggregate, the
amount of all Losses relating thereto for which the Seller would, but for this
provision, be liable exceeds $1,000,000, and then only to the extent of any such
excess; (ii) the Seller's aggregate liability for all such claims shall in no
event exceed $75,000,000; (iii) the Seller shall have no liability for any
breach if Buyer had Knowledge of such breach at the time of the Closing; and
(iv) the Seller's liability arising out of or with respect to the Transition
Services Agreement shall be limited as provided therein, in addition to the
further limitations herein; provided, however, that the foregoing limitations
shall not apply to any claims for Losses made pursuant to Sections 8.2(b)(i),
8.2(b)(ii) or 8.2(b)(v) and any such Losses shall not be included in the
calculation of the aggregate amount of Seller's liability under Article 8 set
forth in Section 8.2(g)(ii). No Indemnified Party may make a claim for
indemnification under Section 8.2(a)(i) for breach by the Indemnifying Party of
a particular representation or warranty after the expiration of the survival
period specified in Section 8.1. Buyer may not make a claim for indemnification
under Section 8.2 following the fifth anniversary of the Closing Date; provided,
however, that with regard to the indemnification obligations of Seller under
Section 8.2(b)(i), there shall be no termination or other limitation.
(h) The amount of any Loss for which indemnification is provided under
this Section 8 shall be net of any amounts recovered or recoverable by the
Indemnified Party under insurance policies with respect to such Loss.
(i) Notwithstanding anything herein or in the Collateral Agreements to
the contrary, neither of the parties hereto or thereto shall be liable to the
other, whether in contract,
39
tort or otherwise, for any special, indirect, incidental, consequential,
punitive or exemplary or other similar type of damages whatsoever, which in any
way arise out of, relate to, or are a consequence of, its performance or
nonperformance hereunder or the Collateral Agreements, misrepresentation (other
than through fraud), including loss of profits, business interruptions and
claims of customers.
(j) Each party further acknowledges and agrees that, from and after the
Closing, except in cases of proven fraud or other willful misconduct or bad
faith,, its sole and exclusive remedy with respect to any and all claims
relating to this Agreement, the Collateral Agreements, the transactions
contemplated hereby, the Purchased Assets and the Assumed Liabilities (other
than claims of, or causes of action arising from, fraud) shall be pursuant to
the indemnification provisions set forth in this Section 8. In furtherance of
the foregoing, from and after the Closing, except in cases of proven fraud or
other willful misconduct or bad faith, each party hereby waives and releases,
from and after the Closing, any and all rights, claims and causes of action
(other than claims of, or causes of action arising from, fraud) it may have
against the other party and its Affiliates arising under or based upon any
Federal, state, local or foreign statute, law, ordinance, rule or regulation or
otherwise (except pursuant to the indemnification provisions set forth in this
Section 8) arising out of or related to this Agreement and the Collateral
Agreements. Notwithstanding the foregoing, nothing in this Section 8.2(j) or
elsewhere in this Agreement shall be deemed to limit any party's right to seek
specific performance or other equitable relief in any court of competent
jurisdiction of its rights and remedies hereunder or in any Collateral
Agreement.
8.3 GENERAL PROCEDURES FOR INDEMNIFICATION
(a) Procedures Relating to Indemnification for Third Party Claims. In
order for the Indemnified Party to be entitled to any indemnification provided
for under this Agreement in respect of, arising out of or involving a claim or
demand made by any person other than a party to this Agreement against the
Indemnified Party (a "Third Party Claim"), such Indemnified Party must notify
the party against whom indemnity is sought (the "Indemnifying Party") in
writing, and in reasonable detail, of such claim or demand within ten (10)
Business Days after receipt by such Indemnified Party of written notice thereof;
provided, however, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the Indemnifying Party
shall have been actually prejudiced as a result of such failure. Thereafter, the
Indemnified Party shall deliver to the Indemnifying Party, within five (5)
Business Days after the Indemnified Party's receipt thereof, copies of all
notices and documents (including court papers) received by the indemnified
parties relating to such claim or demand.
(b) If a Third Party Claim is made against an Indemnified Party, the
Indemnifying Party shall be entitled by written notice provided to the
Indemnified Party within ten (10) days after the Indemnifying Party's receipt of
a notice pursuant to this Section 8.3(b), to participate in the defense thereof
and, if it so chooses and acknowledges its obligation to indemnify the
Indemnified Party therefor, to assume the defense thereof with counsel selected
by the Indemnifying Party. Should the Indemnifying Party so elect to assume the
defense of a Third Party Claim, the Indemnifying Party shall not be liable to
the Indemnified Party for legal expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof. Notwithstanding the
foregoing, in the event (i) such Indemnifying Party fails to make the
40
election specified above within the time period so specified, (ii) such
Indemnified Party reasonably concludes (based on the advice of outside counsel)
that the assumption by such Indemnifying Party of the defense of such Third
Party Claim would be inappropriate due to actual or potential differing
interests between such Indemnified Party and such Indemnified Party or (iii)
such Indemnified Party reasonably concludes (based on the advice of outside
counsel) that that there may be legal defenses available to it that are
different from or in addition to those available to such Indemnifying Party,
such Indemnified Party shall be entitled to assume the defense of such Third
Party Claim through counsel of its own choosing; provided that only the fees and
expenses of one such counsel (and one additional local counsel for each state
jurisdiction in which local counsel shall reasonably be required) shall be
eligible for indemnification pursuant to Section 8.2. Subject to the previous
sentence, if the Indemnifying Party assumes the defense of a Third Party Claim
against an Indemnified Party, the Indemnified Party shall have the right to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnifying Party, it being
understood that the Indemnifying Party shall control such defense.
If the Indemnifying Party so elects to assume the defense of any Third
Party Claim, all of the Indemnified Parties shall cooperate with the
Indemnifying Party in the defense or prosecution thereof. Such cooperation shall
include the retention and (upon the Indemnifying Party's request) the provision
to the Indemnifying Party of records and information that are reasonably
relevant to such Third Party Claim, and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Except with respect to the settlement of a Third
Party Claim which involves the payment of money damages only and provides for a
full and unconditional release from or settlement of liability in respect of
such Third Party Claim, no Third Party Claim which an Indemnifying Party has
elected to defend pursuant to this Section 8.3(b) may be settled without the
prior written consent of the relevant Indemnified Party, which consent shall not
be unreasonably withheld or delayed.
Notwithstanding the foregoing provisions of this Section 8.3(b), the
parties hereby agree that the provisions of this Section 8.3(b) shall have no
application with respect to any claim or demand by an Indemnified Party with
respect to Losses which do not result from a Third Party Claim.
(c) Procedures Relating to Indemnification for Inter-Party Claims. Any
claim or demand by an Indemnified Party with respect to Losses which do not
result from a Third Party Claim shall be asserted in the same manner as
specified in Section 8.3(a). If the Indemnifying Party with respect to such
claim or demand does not acknowledge in writing its obligation to indemnify the
Indemnified Party with respect to such Losses within fifteen (15) days after its
receipt of written notice from the Indemnified Party with respect to such claim
or demand as specified in Section 8.3(a), the Indemnifying Party will be deemed
to have rejected such claim, in which event the Indemnified Party will be free
to pursue such remedies as may be available to it under and as limited by this
Agreement. Notwithstanding anything to the contrary in this Article 8, all
reasonable attorneys' fees and costs incurred by a party hereto prevailing in an
Action against another party hereto shall be borne by such non-prevailing party.
41
(d) Buyer and Seller shall cooperate with each other with respect to
resolving any claim or liability with respect to which one party is obligated to
indemnify the other party hereunder, including by making commercially reasonably
efforts to mitigate or resolve any such claim or liability. In the event that
Buyer or Seller shall fail to make such commercially reasonably efforts to
mitigate or resolve any claim or liability, then notwithstanding anything else
to the contrary contained herein, the other party shall not be required to
indemnify any person for any loss, liability, claim, damage or expense that
could reasonably be expected to have been avoided if Buyer or Seller, as the
case may be, had made such efforts.
9. TERMINATION
9.1 TERMINATION
This Agreement may be terminated at any time prior to the Closing Date
and the transactions contemplated hereby may be abandoned at any time prior to
the Closing:
(a) by the mutual written consent of Seller and Buyer;
(b) by Buyer, if Seller shall have breached any of its representations,
warranties, covenants or other agreements contained in this Agreement, which
breach (i) would give rise to the failure of a condition set forth in Section
7.1 or 7.2, and (ii) is either not capable of being cured to the reasonable
satisfaction of the non-breaching party on or prior to the Outside Date or, if
curable, is not cured within 15 days of receipt from Buyer of written notice
thereof;
(c) by Seller, if Buyer shall have breached any of its representations,
warranties, covenants or other agreements contained in this Agreement, which
breach (i) would give rise to the failure of a condition set forth in Section
7.1 or 7.3, and (ii) is either not capable of being cured to the reasonable
satisfaction of the non-breaching party on or prior to the Outside Date or, if
curable, is not cured within 15 days of receipt from Seller of written notice
thereof;
(d) Buyer or Seller, if there shall be in effect a non-appealable
injunction or order of a Governmental Body of competent jurisdiction prohibiting
the consummation of the transactions contemplated hereby.
(e) Buyer or Seller, if the Closing shall not have occurred on or
before 5:00 p.m., Eastern time, on December 31, 2003 (the "Outside Date");
provided that the failure of the Closing to occur on or before such date did not
result from the failure by the party seeking termination of this Agreement to
fulfill any undertaking or agreement provided for herein that is required to be
fulfilled by it prior to Closing.
9.2 EFFECT OF TERMINATION
In the event of the termination of this Agreement in accordance with
Section 9.1, this Agreement shall become void and have no effect, without any
liability on the part of any party or its directors, officers or stockholders,
except for the obligations of the parties hereto as provided in Sections 2.6(b),
5.10, 10.2, 10.4, 10.5, 10.12, 10.14 and this Section 9.2, and except that,
notwithstanding anything in this Agreement to the contrary, neither Seller nor
Buyer shall
42
be relieved or released from any liabilities or damages arising out of its
breach of any provision of this Agreement.
10. MISCELLANEOUS
10.1 NOTICES
All notices and other communications hereunder and under the Collateral
Agreements shall be in writing and shall be deemed to have been duly given upon
receipt if (a) mailed by certified or registered mail, return receipt requested,
(b) sent by a nationally recognized overnight delivery service (receipt
requested), fee prepaid, (c) sent via facsimile with receipt confirmed, or (iv)
delivered personally, addressed as follows or to such other address or addresses
of which the respective party shall have notified the other.
(a) If to Seller, to:
KPMG LLP
345 Park Avenue
New York, New York 10154
Attention: Jack T. Taylor, Jr.
Facsimile:
------------------------
E-mail: jtaylor@kpmg.com
and
KPMG LLP
Office of General Counsel
280 Park Avenue
New York, New York 10032
Attention: Mark Zuffante, Esq.
Facsimile: (212) 909-5687
E-mail: mzuffante@kpmg.com
With a copy (which shall not constitute notice pursuant to this
Section 10.1) to:
Akin Gump Strauss Hauer & Feld LLP
590 Madison Avenue
New York, NY 10022
Attention: Stephen E. Older, Esq.
Facsimile: 212-872-1002
E-Mail: solder@akingump.com
43
(b) If to Buyer or Parent, to:
FTI Consulting, Inc.
900 Bestgate Road, Suite 100
Annapolis, Maryland 21401
Attention: Theodore I. Pincus, Executive Vice President
and Chief Financial Officer
Facsimile: 410-224-2809
E-Mail: ted.pincus@fticonsulting.com
With a copy (which shall not constitute notice pursuant to this
Section 10.1) to;
Greenberg Traurig, LLP
The MetLife Building
200 Park Avenue
New York, NY 10166
Attention: Clifford E. Neimeth, Esq.
Facsimile: 212-801-6400
E-Mail: neimethc@gtlaw.com
10.2 EXPENSES
Any sales, use or other transfer taxes arising out of or incurred in
connection with the transactions contemplated by this Agreement shall be paid by
Buyer. Except as provided in the preceding sentence or otherwise in this
Agreement or the Collateral Agreements, each party will pay its own costs and
expenses, including legal and accounting expenses, related to the transactions
contemplated by this Agreement, irrespective of when incurred and whether or not
the Closing occurs. For the avoidance of doubt, the parties hereby agree and
acknowledge that all fees and expenses of Grant Thornton in respect of services
performed by Grant Thornton for Buyer or Parent specifically in connection with
any filing, registration or report filed by Parent under the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act shall be borne
solely by Buyer and Parent.
10.3 ENTIRE AGREEMENT
The agreement of Seller and Buyer, which is comprised of this
Agreement, the Schedules and Exhibits hereto, the Collateral Agreements and the
Confidentiality Agreement, sets forth the entire agreement and understanding
between the parties and supersedes any prior agreement or understanding, written
or oral, relating to the subject matter of this Agreement.
10.4 JURISDICTION, SERVICE OF PROCESS
Each of the parties hereto hereby irrevocably and unconditionally
consents to submit to the exclusive jurisdiction of the United States District
Court for the Southern District of New York (as well as all appropriate
appellate courts) or, if jurisdiction in such court is lacking, the courts of
the State of New York sitting in New York County (as well as all appropriate
appellate courts), for any actions, suits or proceedings arising out of or
relating to this Agreement and the Collateral Agreements (and agrees not to
commence any action, suit or proceeding relating thereto except in such courts),
and further agrees that service of any process, summons, notice or document by
U.S. registered mail to its respective address set forth in
44
Section 10.1 will be effective service of process for any action, suit or
proceeding brought against it in any such court. Each of the parties hereto
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement or the
Collateral Agreements in the aforementioned courts and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum. Each of the parties hereto hereby
further irrevocably and unconditionally waives all right to trial by jury in any
action, suit or proceeding arising out of this Agreement or the Collateral
Agreements.
10.5 GOVERNING LAW
This Agreement and the Collateral Agreements will be construed in
accordance with and governed by the internal procedural and substantive laws of
the State of New York applicable to agreements made and to be performed entirely
within such State and without regard to the conflicts of law principles thereof.
10.6 WAIVER
The rights and remedies of the parties to this Agreement and the
Collateral Agreements are cumulative and not alternative. Neither the failure
nor any delay by any party in exercising any right, power or privilege under
this Agreement or the documents referred to in this Agreement will operate as a
waiver of such right, power or privilege, and no single or partial exercise of
any such right, power or privilege will preclude any other or further exercise
of such right, power or privilege or the exercise of any other right, power or
privilege. To the maximum extent permitted by Law, (a) no claim or right arising
out of this Agreement or the Collateral Agreements can be discharged by one
party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver that may be given by
a party will be applicable except in the specific instance for which it is given
and will not operate as a waiver of, or estoppel with respect to, any subsequent
or other failure or noncompliance; and (c) no notice to or demand on one party
will be deemed to be a waiver of any obligation of such party or of the right of
the party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the Collateral Agreements.
10.7 NO ORAL MODIFICATION
Neither this Agreement nor the Collateral Agreement may not be amended
except by a written agreement executed by the party to be charged with the
amendment. Any attempted amendment in violation of this Section 10.7 will be
void ab initio.
10.8 REASONABLE COMMERCIAL EFFORTS
In undertaking "reasonable commercial efforts" or "reasonable efforts"
to satisfy any of its obligations under this Agreement or the Collateral
Agreements, neither party to this Agreement or the Collateral Agreements shall
be required to alter the terms of this Agreement or the Collateral Agreement,
modify its normal business conduct, plans or strategies or take any action that
limits its freedom of action with respect to any of its businesses or assets.
45
10.9 ASSIGNMENTS, SUCCESSORS
No party may assign any of its rights under this Agreement or any
Collateral Agreements without the prior written consent of the other parties
hereto or thereto. Subject to the preceding sentence, this Agreement and the
Collateral Agreements will apply to, be binding in all respects upon, and inure
to the benefit of the successors and permitted assigns of the parties.
10.10 SEVERABILITY
If any provision of this Agreement or the Collateral Agreements is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement and the Collateral Agreements will remain in full
force and effect. Any provision of this Agreement or the Collateral Agreements
held invalid or unenforceable only in part or degree will remain in full force
and effect to the extent not held invalid or unenforceable.
10.11 CAPTIONS
The article, section and paragraph captions herein and the table of
contents hereto are for convenience of reference only, do not constitute part of
this Agreement and the Collateral Agreements and will not be deemed to limit or
otherwise affect any of the provisions hereof or thereof. Unless otherwise
specified, all references herein to numbered articles and sections are to
articles and sections of this Agreement, all references herein to schedules are
to schedules to this Agreement and all references herein to exhibits are to
exhibits to this Agreement.
10.12 NO THIRD PARTY BENEFICIARIES
Nothing in this Agreement or the Collateral Agreements, express or
implied, is intended to or shall (a) confer on any Person other than the parties
hereto and their respective successors or assigns any rights (including third
party beneficiary rights), remedies, obligations or liabilities under or by
reason of this Agreement (except with respect to Indemnified Parties as provided
in Section 8.2) or the Collateral Agreements, or (b) constitute the parties
hereto as partners or as participants in a joint venture. Neither this Agreement
nor the Collateral Agreements shall provide Third Parties with any remedy,
claim, liability, reimbursement, cause of action or other right (except with
respect to Indemnified Parties as provided in Section 8.2). No third party shall
have any rights under Section 502, 503 or 504 of ERISA or any regulations
thereunder because of this Agreement or the Collateral Agreements that would not
otherwise exist without reference to this Agreement or the Collateral
Agreements. No third party shall have any right, independent of any right that
exists irrespective of this Agreement or the Collateral Agreements, under or
granted by this Agreement or the Collateral Agreements, to bring any suit at law
or equity for any matter governed by or subject to the provisions of this
Agreement (except with respect to Indemnified Parties as provided in Section
8.2) or the Collateral Agreements.
46
10.13 COUNTERPARTS
This Agreement and Collateral Agreements may be executed simultaneously
in one or more counterparts, each of which will be deemed to be an original copy
of this Agreement.
10.14 PUBLIC ANNOUNCEMENT
Neither Seller nor Buyer shall, without the approval of the other, make
any press release or other public announcement concerning the existence of this
Agreement or the terms of the transactions contemplated by this Agreement,
except as and to the extent that any such party shall be so obligated by Law or
stock exchange disclosure requirements (subject to Section 5.10), in which case
the other party shall be advised and the parties shall use their reasonable
commercial efforts to cause a mutually agreeable release or announcement to be
issued.
10.15 WAIVER OF COMPLIANCE WITH BULK TRANSFER LAWS
Without limitation as to the provisions of Section 8.2(b)(iii), Buyer
hereby waives compliance by Seller with the provisions of any bulk transfer Laws
which may be applicable to the transactions contemplated hereby and by the
Collateral Agreements; provided that Seller shall remain solely liable for any
liabilities to any Person other than Buyer and its Affiliates resulting from the
failure to comply with such Laws.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
47
IN WITNESS WHEREOF, each party has caused this Agreement to be duly
executed on its behalf by its duly authorized officers as of the date first
written above.
KPMG LLP
By:/s/ Jack T. Taylor
------------------------------------------------
Name: Jack T. Taylor
Title: Vice Chair
DAS BUSINESS, LLC
By: FTI Consulting, Inc., its sole member
By:/s/ Theodore I. Pincus
------------------------------------------------
Name: Theodore I. Picus
Title: EVP/CFO
FTI CONSULTING, INC.
By:/s/ Theodore I. Pincus
------------------------------------------------
Name: Theodore I. Pincus
Title: EVP/CFO
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
EXHIBIT 99.1
NEWS
FRB/WEBER SHANDWICK
FINANCIAL COMMUNICATIONS
RE: FTI CONSULTING, INC.
900 Bestgate Road
Annapolis, MD 21401
(410) 224-8770
FOR FURTHER INFORMATION:
AT FTI CONSULTING: AT FRB|WEBERSHANDWICK:
Jack Dunn Marilyn Windsor Lisa Fortuna Tim Grace
Chairman & CEO General Inquiries Analyst Inquiries Media Inquiries
(410) 224-1483 (702) 515-1260 (312) 640-6779 (312) 640-6667
FOR IMMEDIATE RELEASE
WEDNESDAY, OCTOBER 22, 2003
FTI CONSULTING, INC. ANNOUNCES THIRD QUARTER RESULTS;
REACHES DEFINITIVE AGREEMENT TO ACQUIRE DISPUTE ADVISORY SERVICES
BUSINESS OF KPMG; COMPLETES TEN EYCK ACQUISITION;
ESTABLISHES SHARE REPURCHASE PROGRAM
REPORTS $0.36 PER FULLY DILUTED SHARE FROM CONTINUING
OPERATIONS FOR QUARTER; BOARD AUTHORIZES UP TO $50 MILLION
OF ITS COMMON SHARES OVER NEXT 12 MONTHS
ANNAPOLIS, MD, OCTOBER 22, 2003--FTI CONSULTING, INC. (NYSE: FCN), the premier
national provider of turnaround, bankruptcy and litigation-related consulting
services, today reported results for the third quarter ended September 30, 2003.
Results from continuing operations for the quarter include the contribution from
its August 31, 2002 acquisition of the domestic Business Recovery Services
Division (BRS) of PricewaterhouseCoopers, which was included for one month in
the 2002 third quarter results. Continuing operations exclude the results of the
company's discontinued SEA practice group, which was sold on August 31, 2003.
FTI also announced that it has entered into a definitive agreement with KPMG
LLP, the U.S. accounting and tax firm, to acquire substantially all of KPMG's
domestic Dispute Advisory Services (DAS) business for approximately $89.1
million in cash, and has also completed the acquisition of Ten Eyck Associates,
a financial consulting group that specializes in Securities and Exchange
Commission-related issues.
THIRD QUARTER RESULTS FROM CONTINUING OPERATIONS
For the quarter, revenues from continuing operations were $83.6 million, an
increase of 49.6 percent compared with $55.9 million for the comparable period
in 2002. Revenues from continuing operations increased 13.9 percent compared
with pro forma revenues from continuing operations of $73.4 million for the
quarter ended September 30, 2002, assuming the August 31, 2002 acquisition of
BRS had been effective for the entire third quarter of 2002. Income from
continuing operations grew 84.1 percent to $15.1 million from $8.2 million in
the comparable quarter last year, and earnings from continuing
MORE
FTI CONSULTING, INC.
ADD 1
operations per share grew 50.0 percent to $0.36 on a diluted basis compared with
$0.24 for the comparable period in the prior year, and increased 260.0 percent
compared with $0.10 earnings from continuing operations per diluted share on a
pro forma basis for the third quarter of 2002. Earnings per share for the third
quarter of 2003 includes the effect of the reversal of previously accrued but
unpaid incentive compensation of $2.1 million, or $0.03 per share. This
compensation is not expected to be paid as a result of lower than anticipated
earnings. Including the results of the discontinued operations, discussed below,
earnings per share on a diluted basis were also $0.36.
Cash flow provided by operations was $29.3 million compared with $15.4 million
in the third quarter of the prior year. Earnings from continuing operations
before interest, taxes, depreciation and amortization of property and equipment,
which is included in selling, general and administrative expenses, and
amortization of other intangible assets, which is reflected as a separate line
item in the company's consolidated statements of income (EBITDA), were $28.5
million compared with $16.5 million in the prior year, an increase of 72.7
percent. Although EBITDA is not a measure of financial condition or performance
determined in accordance with Generally Accepted Accounting Principles, the
company believes that the use of EBITDA as a supplemental financial measure is
indicative of the company's capacity to service debt and thereby provides
additional useful information to investors regarding the company's financial
condition and results of operations.
At September 30, 2003, FTI had cash and cash equivalents of approximately $133.4
million. Total long-term debt at September 30, 2003 was $20.9 million, and no
amounts were outstanding under the company's $100 million revolving line of
credit.
Utilization of billable personnel was approximately 78 percent for the quarter.
Average rate per hour for the quarter was $362. Total and billable headcounts at
September 30, 2003 were 750 and 568, respectively.
NINE-MONTH RESULTS FROM CONTINUING OPERATIONS
For the nine months, revenues from continuing operations increased 109.2 percent
to $279.5 million compared with $133.6 million in the prior year. Revenues from
continuing operations increased 15.3 percent compared with pro forma revenues
from continuing operations of $242.5 million for the nine months ended September
30, 2002, assuming the August 31, 2002 acquisition of BRS had occurred at the
beginning of 2002. Income from continuing operations was $52.1 million, an
increase of 170.0 percent over $19.3 million in the prior year. Earnings from
continuing operations per diluted share were $1.25 compared with earnings from
continuing operations per diluted share of $0.59 for the 2002 period, or a 111.9
percent increase, and increased 54.3 percent compared with $0.81 earnings from
continuing operations per diluted share on a pro forma basis for the nine months
ended September 30, 2002.
EBITDA increased by 154.2 percent to $97.6 million for the first nine months of
2003, compared with $38.4 million in the first nine months of 2002. Cash flow
provided by operations for the nine months was $83.1 million compared with $28.4
million in the prior year.
DISCONTINUED OPERATIONS
Discontinued operations includes the results of the company's discontinued SEA
practice group, which was sold on August 31, 2003. Loss from operations of
discontinued operations, net of income taxes,
MORE
FTI CONSULTING, INC.
ADD 2
amounted to $267,000 or $0.01 per share, for the third quarter of 2003 compared
with income from operations, net of income taxes, of $656,000, or $0.02 per
share, for the third quarter of 2002. Income from operations of discontinued
operations was $1.6 million, or $0.04 per share, for the first nine months of
2003 compared with $2.9 million, or $0.09 per share, for the first nine months
of 2002. Net gain from sale of discontinued operations in the third quarter of
2003 of $304,000, or $0.01 per share, primarily represents a refinement of the
estimated taxes to be incurred in connection with the sale of SEA as compared to
the amount estimated and recorded at June 30, 2003.
ACQUISITION OF DISPUTE ADVISORY SERVICES (DAS) BUSINESS OF KPMG
The DAS business assists clients in the analysis and resolution of all phases of
complex claims and disputes in a variety of forums, including litigation,
arbitration, mediation, and other forms of dispute resolution. Located in 14
cities across the United States, 10 of which are in the same cities as FTI,
approximately 26 KPMG partners, 125 other billable professionals, plus support
staff are expected to join FTI. The DAS business has not been historically
operated by KPMG as a separate reporting unit of its forensic accounting and
litigation support practice unit and has not been separately accounted for
financial reporting purposes. KPMG has advised FTI that for the trailing 12
months ended September 30, 2003, the unaudited revenues associated with the 26
DAS partners were approximately $74.0 million. Annual direct compensation and
other costs associated with the transferred DAS partners and billable staff are
expected to total approximately $43.5 million subsequent to the acquisition by
FTI. Selling, general and administrative expenses are estimated at approximately
$12.5 million, resulting in pro forma income from operations of approximately
$18.0 million prior to one-time integration costs.
The purchase will be financed by FTI with a combination of cash on hand,
existing credit lines and/or new credit facilities, and does not include any
working capital. Because FTI is not acquiring the net working capital of DAS,
the initial working capital, estimated at approximately $14.0 million, is
expected to be provided by FTI and reflected as a use of cash in operating
activities for FTI's financial reporting purposes during the first three to four
months after the acquisition is completed. Consummation of the acquisition is
subject to certain closing conditions, including the expiration of early
termination of applicable Hart-Scott-Rodino waiting periods, the receipt of
certain third-party consents and other customary conditions to closing. Although
there can be no assurance that the transaction will be consummated, FTI and KPMG
expect to close before the end of October 2003. FTI and KPMG will also enter
into a transition services agreement to provide for the orderly transfer of DAS
personnel from KPMG to FTI offices. The 26 DAS partners and two other members of
the DAS leadership group will enter into five-year employment agreements and
become senior managing directors of FTI Consulting.
STATUS OF PENDING ACQUISITION OF LEXECON
The pending acquisition of the assets of Lexecon Inc. has been granted
early termination of Hart-Scott-Rodino waiting periods, and a vote by the
shareholders of its parent, Nextera Enterprises, has been scheduled for November
14, 2003. In connection with the asset purchase agreement, Knowledge Universe,
Inc. and Nextera Enterprises Holdings, Inc. entered into a voting agreement in
which they agreed to vote shares representing approximately 71 percent of the
voting power of Nextera in favor of the transactions contemplated by the
purchase agreement. Subject to a favorable vote by such shareholders, the
acquisition of Lexecon is expected to occur on November 30, 2003. The Lexecon
acquisition, as previously reported, is expected to add approximately 200
employees. For the trailing 12 months ended June 30, 2003, Lexecon had
preliminary unaudited annual revenues exceeding $72.0 million and pro forma
EBITDA on a separate company basis of approximately $15.0 million.
MORE
FTI CONSULTING, INC.
ADD 3
OUTLOOK FOR THE FOURTH QUARTER OF 2003
Absent any significant impact from the two potential acquisitions (Lexecon and
DAS), FTI believes that revenues for the fourth quarter of 2003 are anticipated
to range from $82.0 million to $84.0 million. Earnings per diluted share are
anticipated to range from $0.30 to $0.33. Utilization of billable personnel is
anticipated to be approximately 80 percent, average rate per hour is expected to
approximate the third quarter level of $362 per hour, and billable headcount is
anticipated to range from 560 to 570.
In addition, the combined contribution to earnings per share in the fourth
quarter of 2003 of the two potential acquisitions is expected to range from an
additional $0.02 to $0.03 if such acquisitions are completed before the end of
November 2003.
OUTLOOK FOR 2004
Absent any significant impact from the two potential acquisitions or a
resumption of higher levels of restructuring activity before early 2005, FTI
believes that revenues for 2004 are anticipated to continue at the run rate for
the third and fourth quarters of 2003 and to range from $320.0 million to $340.0
million. Earnings per diluted share are anticipated to range from $1.30 to
$1.35. Utilization of billable personnel is anticipated to be approximately 80
percent, average rate per hour is expected to be approximately the same as 2003,
and billable headcount is anticipated to average at about current levels before
acquisitions.
In addition, the combined contribution to earnings per share in 2004 of the two
potential acquisitions is expected to range from an additional $0.29 to $0.37 if
such acquisitions are completed by year-end 2003.
FTI has not yet completed its quarter-to-quarter outlook for 2004 but presently
anticipates that results would reflect the company's historical seasonal
pattern, with third quarter results the lowest of the year.
MANAGEMENT COMMENTS
President and chief operating officer, Stewart Kahn, said, "The results for
the quarter were not up to expectations, but they did represent a considerable
achievement for FTI personnel compared to the third quarter of the prior year.
We are continuing to address the slowdown in the restructuring market by
repositioning our resources for other assignments and our active acquisition
program. Although the restructuring market in 2004 is expected to continue to
reflect the slowdown that we are currently experiencing, the other aspects of
FTI's business, including forensic accounting, investigative services,
electronic evidence and economic consulting are expected to offset a substantial
part of the decline in restructuring volume. Given the recent increase in the
volume of debt originations, we expect a resumption of higher levels of
restructuring activity beginning either late in 2004 or early 2005
"Although there can be no assurance of the timing or certainty of acquisitions,
the acquisition of Ten Eyck Associates, which we have just completed, and the
DAS and Lexecon acquisitions that are pending, would significantly change the
balance of our services portfolio from approximately 70 percent restructuring to
less than 40 percent, and are expected to absorb resources on complementary
assignments. The DAS group, led by Roger Carlile, will become part of our
overall forensic accounting and fraud investigation practice and will
dramatically increase the scope and depth of our expertise, as well as our
geographic presence. The DAS group also substantially adds to our experience in
intellectual property matters, and in a number of industries including
healthcare, construction and aerospace and defense," Kahn added.
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FTI CONSULTING, INC.
ADD 4
Jack Dunn, chairman and chief executive officer said, "Over the last 90 days, we
have worked hard not only to diversify our company, but to establish an array of
services that can be offered with distinction to our many clients. This work
represents a large step in our strategy to establish a franchise as a leader in
providing financial consulting services as a preferred alternative in the post
Sarbanes-Oxley world. We believe the additions of Ten Eyck, Lexecon and the DAS
practice our our existing group of great professionals will set the stage for
our performance for many years to come."
SHARE REPURCHASE PROGRAM
FTI's Board of Directors has approved a share repurchase program under which the
company may purchase, from time to time, up to $50 million of the company's
common shares over the next 12 months. The shares may be purchased through open
market or privately negotiated transactions and will be funded with a
combination of cash on hand, existing credit lines and/or new credit facilities.
THIRD QUARTER CONFERENCE CALL
FTI will hold a conference call to discuss third quarter results and
management's outlook for the fourth quarter of 2003 and for 2004 at 11:00 a.m.
EDT on Thursday, October 23, 2003. The call can be accessed live and will be
available for replay over the Internet by logging onto www.vcall.com as well as
on the company's website, www.fticonsulting.com, for 90 days.
ABOUT FTI CONSULTING
FTI Consulting is a multi-disciplined consulting firm with leading practices in
the areas of turnaround, bankruptcy and litigation-related consulting services.
Modern corporations, as well as those who advise and invest in them, face
growing challenges on every front. From a proliferation of "bet-the-company"
litigation to increasingly complicated relationships with lenders and investors
in an ever-changing global economy, U.S. companies are turning more and more to
outside experts and consultants to meet these complex issues. FTI is dedicated
to helping corporations, their advisors, lawyers, lenders and investors meet
these challenges by providing a broad array of the highest quality professional
practices from a single source.
This press release includes "forward-looking" statements that involve
uncertainties and risks. There can be no assurance that actual results will not
differ from the company's expectations. The company has experienced fluctuating
revenues, operating income and cash flow in some prior periods and expects this
may occur from time to time in the future. As a result of these possible
fluctuations, the company's actual results may differ from our projections.
Other factors that could cause such differences include pace and timing of
additional acquisitions, the company's ability to realize cost savings and
efficiencies, competitive and general economic conditions, and other risks
described in the company's filings with the Securities and Exchange Commission.
FTI IS ON THE INTERNET AT www.fticonsulting.com.
-FINANCIAL TABLES FOLLOW-
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FTI Consulting, Inc.
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FTI CONSULTING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER-SHARE DATA)
THREE MONTHS ENDED
9/30/2003 9/30/2002
--------- ---------
(UNAUDITED)
REVENUES $ 83,593 $ 55,859
DIRECT COST OF REVENUES 37,388 27,278
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 19,165 13,246
AMORTIZATION OF OTHER INTANGIBLE ASSETS 775 252
--------- ---------
TOTAL COSTS AND EXPENSES 57,328 40,776
--------- ---------
OPERATING INCOME 26,265 15,083
INTEREST EXPENSE, NET 845 1,251
--------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 25,420 13,832
INCOME TAXES 10,295 5,596
--------- ---------
INCOME FROM CONTINUING OPERATIONS 15,125 8,236
INCOME (LOSS) FROM OPERATIONS OF DISCONTINUED OPERATIONS,
NET OF INCOME TAX(1) (267) 656
LOSS FROM SALE OF DISCONTINUED OPERATIONS, NET OF INCOME TAXES 304 -
--------- ---------
NET INCOME $ 15,162 $ 8,892
========= =========
INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE, BASIC $ 0.36 $ 0.25
INCOME FROM DISCONTINUED OPERATIONS PER COMMON SHARE, BASIC 0.00 0.02
========= =========
EARNINGS PER COMMON SHARE, BASIC $ 0.36 $ 0.27
========= =========
WEIGHTED AVERAGE SHARES FOR BASIC(2) 41,764 32,435
========= =========
INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE, DILUTED $ 0.36 $ 0.24
INCOME FROM DISCONTINUED OPERATIONS PER COMMON SHARE, DILUTED 0.00 0.02
========= =========
EARNINGS PER COMMON SHARE, DILUTED $ 0.36 $ 0.26
========= =========
WEIGHTED AVERAGE SHARES FOR DILUTED(2) 42,585 34,515
========= =========
(1) REVENUES INCLUDED IN DISCONTINUED OPERATIONS WERE $6,495
AND $11,021 FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003 AND
2002, RESPECTIVELY.
(2) WEIGHTED AVERAGE SHARES HAVE BEEN ADJUSTED TO REFLECT THE
THREE-FOR-TWO STOCK SPLIT EFFECTED AS A STOCK DIVIDEND PAID
TO SHAREHOLDERS ON JUNE 4, 2003.
SUPPLEMENTAL FINANCIAL DATA
THREE MONTHS ENDED
9/30/2003 9/30/2002
--------- ---------
(IN THOUSANDS)
EBITDA FROM CONTINUING OPERATIONS(3)
EBITDA RECONCILIATION:
EBITDA FROM CONTINUING OPERATIONS $ 28,471 $ 16,501
DEPRECIATION AND AMORTIZATION 2,206 1,418
--------- ---------
REPORTED OPERATING INCOME 26,265 15,083
INTEREST EXPENSE, NET 845 1,251
INCOME TAXES 10,295 5,596
--------- ---------
INCOME FROM CONTINUING OPERATIONS 15,125 8,236
INCOME (LOSS) FROM DISCONTINUED OPERATIONS 37 656
--------- ---------
NET INCOME $ 15,162 $ 8,892
========= =========
(3) EBITDA (EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION) IS
A NON-GAAP FINANCIAL MEASURE DEFINED AS OPERATING INCOME BEFORE
DEPRECIATION AND AMORTIZATION. GENERALLY, A NON-GAAP FINANCIAL MEASURE IS
A NUMERICAL MEASURE OF A COMPANY'S PERFORMANCE, FINANCIAL POSITION, OR
CASH FLOW THAT EITHER EXCLUDES OR INCLUDES AMOUNTS THAT ARE NOT NORMALLY
EXCLUDED OR INCLUDED IN THE MOST DIRECTLY COMPARABLE MEASURE CALCULATED
AND PRESENTED IN ACCORDANCE WITH GAAP. THIS MEASURE, HOWEVER, SHOULD BE
CONSIDERED IN ADDITION TO, AND NOT AS A SUBSTITUTE OR SUPERIOR TO,
OPERATING INCOME, CASH FLOWS, OR OTHER MEASURES OF FINANCIAL PERFORMANCE
PREPARED IN ACCORDANCE WITH GAAP.
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Add 6
FTI CONSULTING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER-SHARE DATA)
NINE MONTHS ENDED
9/30/2003 9/30/2002
--------- ---------
(UNAUDITED)
REVENUES $ 279,470 $ 133,556
DIRECT COST OF REVENUES 126,998 65,512
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 59,119 32,796
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLE ASSETS 2,325 252
--------- ---------
TOTAL COSTS AND EXPENSES 188,442 98,560
--------- ---------
OPERATING INCOME 91,028 34,996
INTEREST EXPENSE, NET 3,416 2,582
--------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES 87,612 32,414
INCOME TAXES 35,485 13,097
--------- ---------
INCOME FROM CONTINUING OPERATIONS 52,127 19,317
INCOME FROM OPERATIONS OF DISCONTINUED OPERATIONS,
NET OF INCOME TAXES(1) 1,649 2,867
LOSS FROM SALE OF DISCONTINUED OPERATIONS, NET OF INCOME TAXES (6,971) -
--------- ---------
NET INCOME $ 46,805 $ 22,184
========= =========
INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE, BASIC $ 1.28 $ 0.63
INCOME (LOSS) FROM DISCONTINUED OPERATIONS PER COMMON SHARE,
BASIC (0.13) 0.09
========= =========
EARNINGS PER COMMON SHARE, BASIC $ 1.15 $ 0.72
========= =========
WEIGHTED AVERAGE SHARES FOR BASIC(2) 40,597 30,801
========= =========
INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE, DILUTED $ 1.25 $ 0.59
INCOME (LOSS) FROM DISCONTINUED OPERATIONS PER COMMON SHARE,
DILUTED (0.13) 0.09
========= =========
EARNINGS PER COMMON SHARE, DILUTED $ 1.12 $ 0.67
========= =========
WEIGHTED AVERAGE SHARES FOR DILUTED(2) 41,806 33,017
========= =========
(1) REVENUES INCLUDED IN DISCONTINUED OPERATIONS WERE $24,011
AND $35,078 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
AND 2002, RESPECTIVELY.
(2) WEIGHTED AVERAGE SHARES HAVE BEEN ADJUSTED TO REFLECT THE
THREE-FOR-TWO STOCK SPLIT EFFECTED AS A STOCK DIVIDEND
PAID TO SHAREHOLDERS ON JUNE 4, 2003.
SUPPLEMENTAL FINANCIAL DATA
NINE MONTHS ENDED
9/30/2003 9/30/2002
--------- ---------
(IN THOUSANDS)
EBITDA FROM CONTINUING OPERATIONS(3)
EBITDA RECONCILIATION:
EBITDA FROM CONTINUING OPERATIONS $ 97,640 $ 38,404
DEPRECIATION AND AMORTIZATION 6,612 3,408
--------- ---------
REPORTED OPERATING INCOME 91,028 34,996
INTEREST EXPENSE, NET 3,416 2,582
INCOME TAXES 35,485 13,097
--------- ---------
INCOME FROM CONTINUING OPERATIONS 52,127 19,317
INCOME (LOSS) FROM DISCONTINUED OPERATIONS (5,322) 2,867
--------- ---------
NET INCOME $ 46,805 $ 22,184
========= =========
(3) EBITDA (EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION) IS
A NON-GAAP FINANCIAL MEASURE DEFINED AS OPERATING INCOME BEFORE
DEPRECIATION AND AMORTIZATION. GENERALLY, A NON-GAAP FINANCIAL MEASURE IS
A NUMERICAL MEASURE OF A COMPANY'S PERFORMANCE, FINANCIAL POSITION, OR
CASH FLOW THAT EITHER EXCLUDES OR INCLUDES AMOUNTS THAT ARE NOT NORMALLY
EXCLUDED OR INCLUDED IN THE MOST DIRECTLY COMPARABLE MEASURE CALCULATED
AND PRESENTED IN ACCORDANCE WITH GAAP. THIS MEASURE, HOWEVER, SHOULD BE
CONSIDERED IN ADDITION TO, AND NOT AS A SUBSTITUTE OR SUPERIOR TO,
OPERATING INCOME, CASH FLOWS, OR OTHER MEASURES OF FINANCIAL PERFORMANCE
PREPARED IN ACCORDANCE WITH GAAP.
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ADD 7
FTI CONSULTING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(in thousands of dollars)
SEPTEMBER 30, SEPTEMBER 30,
2003 2002
---------------------------
(unaudited)
Operating activities
Net income $ 46,805 $ 22,184
Adjustment to reconcile net income to net
cash (used in) provided by operating
activities:
Depreciation and other amortization 4,682 3,627
Amortization of other intangible assets 2,325 252
Income tax benefit from stock option exercises 11,173 9,090
Provision for doubtful accounts 5,213 891
Non-cash charge on sale of discontinued operations 6,691 -
Non-cash interest and other 2,351 510
Changes in operating assets and liabilities:
Accounts receivable, billed and unbilled 2,286 (17,915)
Income taxes, current and deferred 4,492 3,289
Accrued compensation expense (4,805) 4,580
Billings in excess of services provided (1,383) 1,756
Other assets and liabilities 3,260 140
------------ ------------
Net cash provided by operating activities 83,090 28,404
Investing activities
Purchase of property and equipment, net (7,988) (5,949)
Cash received from sale of discontinued operations 12,150 -
Acquisition of subsidiaries and contingent payments (408) (144,750)
Change in other assets 105 (666)
------------ ------------
Net cash used in investing activities 3,859 (151,365)
Financing activities
Issuance of common stock and exercise of options 14,411 6,641
Proceeds from stock offering 99,223 -
Borrowings under long-term debt arrangements - 119,000
Repayments on long-term debt (76,954) (8,250)
Changes in long-term liabilities (117) (3,668)
------------ ------------
Net cash provided by financing activities 36,563 113,723
------------ ------------
Net decrease in cash and cash equivalents 123,512 (9,238)
Cash and cash equivalents at beginning of period 9,906 12,856
------------ ------------
Cash and cash equivalents at end of period $ 133,418 $ 3,618
=========== ===========
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ADD 8
FTI CONSULTING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
(in thousands of dollars, except share data)
September 30, December 31,
2003 2002
------------------ -----------------
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 133,418 $ 9,906
Accounts receivable, less allowances 36,919 29,271
Unbilled receivable, less allowances 21,159 35,576
Other current assets 6,105 5,529
Current assets of discontinued operations - 11,084
------------------ -----------------
Total current assets 197,601 91,366
------------------ -----------------
Property and equipment, net 18,188 14,938
Goodwill, net 298,315 299,241
Other intangible assets, net 1,742 4,067
Notes receivable 8,000 -
Other assets 4,691 5,999
Non-current assets of discontinued operations - 14,920
------------------ -----------------
Total Assets $ 528,537 $ 430,531
================== =================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and other accrued expenses $ 34,960 $ 36,810
Deferred income taxes 193 193
Current portion of long-term debt 9,504 20,000
Billings in excess of services provided 18,361 19,921
Current liabilities of discontinued operations - 664
------------------ -----------------
Total current liabilities 63,018 77,588
------------------ -----------------
Long-term debt, less current portion 11,375 77,833
Deferred income taxes and other liabilities 13,300 7,135
Stockholders' equity
Preferred stock, $0.01 par value; 5,000,000 shares
authorized, none outstanding - -
Common stock, $0.01 par value; 75,000,000 shares
authorized; 41,820,663 and 36,006,438 shares issued
and outstanding in 2003 and 2002, respectively 418 360
Additional paid-in capital 325,684 200,456
Unearned compensation (79) (346)
Retained earnings 115,003 68,198
Accumulated other comprehensive income (loss) (182) (693)
------------------ -----------------
Total stockholders' equity 440,844 267,975
------------------ -----------------
Total Liabilities and Stockholders' Equity $ 528,537 $ 430,531
================== =================